BoK Governor Rhee's press conference is unfolding and the current tone is pushing back on market rate cut expectations.

• The Governor noted that today's decision was unanimous, while some had been looking for a potential dissent from one or more board members. 2 out of the 6 board members stated they are open to rates lower than 3.50% (the current policy rate) in 3 months, while 4 board members see the policy rate at 3.5% in 3 months time.
• This is an incremental shift from the prior board meeting, where one only board member was open to the possibility of cut in 3 months. Governor Rhee has also stated that the central bank is preparing to 'switch lanes' in terms of policy direction.
• Still, Rhee stated the two members open to a cut have concerns around household debt and FX (so financial stability). The Governor added financial stability concerns could impact the timing of the BoK's move away from an on hold stance.
• The central bank is looking at house price rises more seriously compared with May and that the housing market is getting ahead of itself from a rate cut outlook standpoint. House price developments, along with household debt levels, are likely to take on increased focus.
• Rhee stated broader market rate cut expectations were somewhat excessive as well.
• Market pricing in terms of BOK cuts has shifted, the 3 month (white line), 6 month and 12 month expectations are plotted below. The 3 month outlook is almost back to the current policy rate of 3.5%. the 6 month outlook has around 1 cut priced in.

Fig 1: BOK Market Pricing (MIPR BBG)

Source: MNI - Market News/Bloomberg