Bank of Korea Governor Ri Chang-yong says it is too early to talk about a rate cut.
South Korea’s central bank was one of the first to halt its tightening cycle, fueling market speculation that it could soon start cutting rates. But Ri told CNBC cherry kong said at the Asian Development Bank’s annual meeting in Incheon that those expectations are “premature”.
“We’ve made that clear,” Ri said on Wednesday, noting that our core inflation is still well above our target, and our inflation is going down to 4% … so it’s going down. ” “But still, I think it’s above target, we’ll have to wait and see and then you know, it’s a little premature to talk about pivoting at this point.”
Ri’s comments come a day after the economy reported inflation hovering above the central bank’s target of 2% at a 14-month low of 3.7%.
“We capped our interest rate [hikes] In the last two meetings because we have increased our interest rate by 300 basis points over a year and a half, at a very rapid pace. And we think this is the right time for us to kind of assess what the accumulated impact is from this rapid growth,” Rea said.
Wall Street banks such as Citi predict South Korea could begin a rate-cutting cycle as early as the third quarter as headline consumer price index readings come down further.
“In our view, headline CPI is likely to fall to the early-mid 3% YoY level in May’23E and to the 2% YoY level in June’23E, potentially opening scope for a rate-cut cycle from 3Q23E,” Citi economists Jiuk Choi and Jin-wook Kim said in a Tuesday note.
Inflation is at its peak
The Governor of the Bank of Korea said that despite seeing stability in core readings, global inflation levels have peaked.
“I think the tightening cycle in advanced economies is nearing the end,” he said, adding that he felt advanced economies could not continue their rapid growth given “financial stability issues” in the US and Europe. Are.
He said the banking crisis in the West had limited impact on South Korea. He also said that the foreign exchange rate is not related to the South Korean currency.
“We are not too worried on every day change of the exchange rate, but we certainly have to be careful for large volatility,” he said, noting that the currency has traditionally put pressure on dividend payments to foreign investors in April. have seen.
south korean won In early Wednesday, the US dollar fell to 1,340.77, its weakest level since November.