We have scaled back our Bank of Korea policy forecast from two rate hikes this year to only one in the third quarter
A Bloomberg headline this week that “S. Korea’s Household Debt Hits Record $1.3 Trillion in 2017” punches monetary policy hawks ahead of the Bank of Korea (BoK) monetary policy meeting on Tuesday, February 27. The article cited an 8% rise in household debt in the last year led by surging mortgage debt. The pace of debt growth has slowed from 11.6% in 2016 but it’s still too rapid for an economy growing at only 3%. The article also cited the risk of rising debt defaults as interest rates go up. High household debt has prominently appeared as a risk in BoK policy statements.
Inflation dominates the Asian release calendar at a time when markets are particularly prone to upside shocks