Hike Cycle Kicks Off: BoK Review | Asia Pacific

研报英文原文证据摘录

Hike Cycle Kicks Off: BoK Review | Asia Pacific

IdeaMstance represent a policy conflict, Governor Shin said that it was the nature of the fiscal

expenditure that matters most. Plus, as the current fiscal direction is focused on growth-

stimulating investment spending rather than pure income transfers, he views the two

policy stances as complementary rather than contradictory. We take this as indicating that

higher growth and inflation from fiscal expansion are consistent with higher rates.

We interpret this as a clear signal that the government's expansionary budget

announcement, expected by end-August, which is widely expected to see at least a 10%Y

increase to over W800tn, is unlikely to constrain the pace and extent of the BoK's hiking

cycle. If anything, a budget weighted toward investment and infrastructure spending

would reinforce the BoK's case for continued normalization, we believe.

We expect the next hike in October with terminal rate call

unchanged at 3.5%

We continue to expect a total of four hikes in this cycle, bringing the terminal rate to

3.5% by Q2 2027. The oil-price-driven second-round inflationary effects are likely to

persist well into next year, and the fact that the hiking cycle must run until the BoK has

sufficient confidence that inflation is returning to its 2% target suggests this will be a

prolonged, measured process rather than a front-loaded one.

In this context, the data dependency that Governor Shin emphasized will be the critical

determinant of the three subsequent hikes we are looking for. Any upside surprises to the

upcoming GDP and CPI inflation prints could be the key variables that bring forward a hike

into the August meeting. That said, our base case is for a strong Q2 GDP print above 3%