The Bank of Korea decided today to raise the policy rate by a further 25bp, the fourth hike in this current cycle. From the perspective of BOK leadership - the bank currently being between governors - this was a mild surprise. But from the point of view of the economy, it was less unexpected. Activity has shown signs of peaking, but in recent weeks inflation has become more of a concern.
These shifts have been clear in recent data, and were also noted by the BOK in today's statement. Compared with its last economic forecasts made in February, the bank said that GDP growth this year is likely to be somewhat lower, but at the same time it projected inflation to be "substantially higher".
It is easy to imagine the BOK being hawkish again at its next meeting in May. But the next rate decision after that won't come until July, and by then the policy debate will likely have become trickier. Leading indicators suggest inflation won't have fallen much by then, but given the cracks that have started to appear, it is conceivable that the cycle would have slowed more visibly.