Asia week ahead: Bank of Korea likely to hike rates next week

The Bank of Korea (BoK) will meet next Thursday and we expect it to carry out a 25bp hike. Consumer prices edged up in October but inflation appears to have passed its peak. The recent FX market move probably would be one factor for BoK to adjust its pace of tightening after its recent jumbo increase. However, given that financial market stresses remain high, the BoK will need to consider market stability for its policy decision.

Next week, Japan will release November CPI inflation for Tokyo. We expect Tokyo inflation to accelerate to 3.6% year-on-year, from 3.5% in October. The travel voucher programme probably cooled down some of the service price pressures although other commodity prices rose to offset this decline.

In Singapore, inflation is expected to remain elevated for both headline and core, although the headline number may dip from last month. Evident price pressure should keep the Monetary Authority of Singapore hawkish to close out the year as it monitors the impact of recent tightening.

Taiwan will release data on export orders and industrial production. We project both figures to post a YoY contraction due to softer demand for semiconductors. Demand for electronics has been dampened by a mix of high inflation data in some economies and slower growth for others. More upside however could be anticipated in next month’s data as China’s Covid-19 measures have been eased.

China will release its Loan Prime Rate next Monday and we expect no change from the current 3.65% for 1Y and 4.3% for 5Y. Loan prime rates will likely be untouched as the Medium Lending Facility Rate was put on hold by the People's Bank of China.

Lastly, Singapore will report revised third-quarter GDP figures and we expect a downward revision to the earlier report. Both retail sales and non-oil domestic exports have shown signs of moderation as higher inflation and slowing global trade appear to be taking their toll on the growth momentum.