The Bank of Korea reported that its inflation forecasts for next year have been revised upward from the August estimates of 2.3% for headline CPI and 2.5% for core CPI. The revision signals that the central bank now expects price pressures to be stickier than previously assumed, which tends to push back expectations for policy easing. Through the rate differential channel, a more hawkish BOK outlook narrows the gap against major central banks that are cutting, which can support the won and weigh on relative USD demand in Asian pairs. Korean government bonds and short-dated KTB yields are most directly exposed, as markets reprice the path of the policy rate, while the won and rate-sensitive domestic equities respond to the shift in relative monetary stance. Traders should watch Korea's next monthly CPI release and the subsequent Monetary Policy Board statement for confirmation of whether the upward revision reflects food, energy, or underlying services inflation.
BOK: INFLATION FORECASTS FOR NEXT YEAR HAVE RISEN ABOVE THE AUGUST ESTIMATES OF 2.3% FOR CPI AND 2.5% FOR CORE CPI
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