Bank of Korea Governor Rhee Chang-Yong says it’s too soon to discuss rate cuts.
The South Korean central bank, which was among the first to halt its tightening cycle, has sparked market speculation that it may initiate rate cuts in the near future. However, Governor Rhee, during an interview with CNBC's Chery Kang at the Asian Development Bank's annual meeting in Incheon, stated that such expectations are premature.
“We made it clear, given that our core inflation is still well above our target, and our inflation is going below 4% … so it’s going down, But still, I think that given that it’s above the target, we have to wait and see and then you know, it would be a little bit premature to talk about pivot at this moment.” Rhee said Wednesday.
“We paused our interest rate [hikes] in the last two meetings because we have increased our interest rate by 300 basis points in 1½ years, very fast in pace. And we think it’s the right time for us to kind of assess what is the accumulated impact from this rapid increase,” Rhee said.
Citi- a Wall Street Bank foresee Korea making rate cutting cycle as early as the third quarter as consumer price index readings continue to decline, reaching lower levels.
“In our view, headline CPI is likely to fall to early-mid 3%YoY levels in May′23E and 2%YoY levels in June′23E, potentially opening up scope for a rate-cutting cycle from 3Q23E,” Citi economists Jiuk Choi and Jin-Wook Kim said in a Tuesday note.
Heightened Inflation:
The governor of the Bank of Korea acknowledged that global inflation levels appear to have reached their highest point, although there are indications of persistent inflationary pressures in core readings.
The banking crises occurring in the west does not have a heavy impact on South Korea. The Governor also pointed out that there are no concerns regarding the foreign exchange rate for South Korea.
Early on Wednesday, the South Korean won reached a level of 1,340.77 against the U.S. dollar, marking its weakest position since November.
