Bank of Korea to kick start tightening cycle

A combination of above-target inflation, buoyant growth, a struggling currency, and rising property prices in Seoul all point to the Bank of Korea hiking rates by 25bp to 2.75% next week. We currently only expect one more 25bp hike beyond that but recent hawkish statements from new Governor Shin mean the risks are tilted towards more aggressive tightening. In a similar vein, the further rise in inflation in Taiwan in June is likely to add to the hawkish voices at the central bank and the odds of rate hikes later this year are shortening.