Hotter than expected prices put South Korea on track for a July hike
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ASIA/PACIFIC: South Korea’s inflation pressures broadened and firmed in May. With growth holding up and inflation on a higher path, the Bank of Korea is poised to begin a new tightening cycle. We expect the BoK to raise rates by 25bp in July, October, and again in the first half
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The desk views South Korea's inflation management as effective in the short term, with government measures mitigating the impact of high energy prices. Per the full note from ing-think, while inflation rose in April, these interventions have limited the extent of the increase. The Bank of Korea is expected to maintain its current interest rate in May, but rising inflation could lead to a rate hike as soon as July. This outlook aligns with our consensus target for the KRW, which reflects a cautious but optimistic stance on the currency's performance against the USD.