My latest video, discussing two of the issues that puzzle me about Korea: the weakness of the KRW despite surging export growth, and the strength of inflation despite GDP growth – until today – being well below potential.

Today's consumer confidence survey warns of higher inflation but slower growth. That is the BOK's base case, and if growth does slow, then there is a reason to look through inflation. But today's Q1 GDP data show much higher growth, boosted by a semi cycle that isn't yet ending.

Yesterday's loan officer survey and today's PPI print both warn about inflation risks. However, in PPI, it is only goods prices that offer clarity. Services PPI has risen too, but seems to suffer from the sort of distortions that are making trends in CPI services inflation difficult to interpret.

Energy import prices surged 50% in March, and that will undoubtedly raise inflation. However, Korea's terms of trade actually continued to rise (just about), helped by the continued sharp rise in chip export prices. For Korean growth, there is an offset to this energy crisis.

Trade data for the first 10 days are volatile. But the April data are still worth highlighting. They show strong exports and a rising trade surplus, which offers a contrast with the BOK's concerns about the cycle, and the market's worries about the KRW.

For me, the tone of today's BOK meeting was a surprising mix of uncertainty and conviction. On the one hand, the bank stressed that the outlook is unclear, depending on events in the Middle East. On the other, it seems very sure that inflation will be quite a lot higher than 2%, and growth lower.

GDP growth has been below the BOK's estimate of potential almost continually since 2022. And yet core inflation hasn't dropped below target, and private services inflation – a proxy for domestically generated inflation – has picked up to above 3%. Just what is going on?

Government measures are restraining energy prices and so headline CPI. But the war still increases upside risks for inflation. Rising oil prices are pushing up energy and intermediate prices, export growth is strong, and core inflation has been resilient.

The easy takeaway from the rise in prices and fall in sentiment in the BOK's business sentiment survey for March/April is stagflation. I think there are reasons as yet to discount the idea that activity has slowed, but if that is right, then the rise in inflation makes BOK rate hikes more likely.