Bank of Korea to cut rates next year as headwinds mount

The Bank of Korea (BoK) is almost certain to hike interest rates further this year, but with financial risks receding, economic growth likely to slow and inflation set to fall back to target by early next year, we think financial markets and the consensus are wrong to expect the tightening cycle to continue into 2023. On the contrary, our forecast is that the BoK will start cutting interest rates around the middle of next year.