Robert Carnell, Chief Economist at ING, suggests that they don’t think the Bank of Korea (BoK) will hike at this Thursday’s meeting, and they don’t believe a hike is what the Korean economy needs.
Key Quotes
“As far as forward guidance goes, BoK Governor Lee has provided a little for everyone recently. For the seven of 18 consensus hawks looking for a policy rate hike to 1.75% from 1.5% at this meeting, comments that inflation was no impediment to a rate hike now the headline rate was close to 2.0%, house prices high and household debt worrisome, the outcome must seem fairly clear.”
“But the Governor has also been clear to point out that structural issues such as household debt are not a monetary issue alone. He has also noted that the house price problem is largely a Seoul-only phenomenon. And any hike that is administered would have to be set against the expectation that the BoK will be revising down their GDP forecasts in their latest assessment.”
“We’re reasonably comfortable in forecasting no change to rates this month.”
“But we are less comfortable with our no change in rates this year. We may get a signal on Thursday 18th October that a November hike is coming. In which case, we will not ignore it and will change our current forecasts for no change this year. That doesn’t mean we will agree with it.”
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