South Korea is set to announce its rate decision, where we expect a 25bp hike. Data highlights include updates on Chinese economic activity and Indian inflation
South Korea: BoK to raise rates 25bps amid firming inflation
South Korea’s inflation pressures have broadened and firmed. With growth holding up and inflation on a higher trajectory, the Bank of Korea is poised to begin a new tightening cycle on Thursday. We expect the BoK to raise rates by 25bp.
India: Lower oil to cool wholesale prices, less so consumer prices
We expect India’s consumer price inflation to edge slightly higher to 4.2% year-on-year in June, while wholesale price inflation is likely to moderate to 9%. Softer Brent crude prices should pull wholesale prices lower, but persistent retail fuel costs, gradually firming food inflation and sticky core pressures point to a mild uptick in consumer inflation. Overall, inflation risks remain tilted to the upside, as El Niño-related weather disruptions threaten food costs. The gradual pass-through of wholesale prices to retail prices, meanwhile, is expected to support underlying inflation pressures.
China: We expect mixed signals from key macro activity data
China’s key macro activity indicators are all set for release next Tuesday and Wednesday. We expect the divergence in China’s increasingly K-shaped economy to continue in June. We look for trade data, out on Tuesday, to show solid export growth of around 17.5% YoY with import growth of 24.0%, resulting in a trade surplus of $120.1bn. On Wednesday, domestic activity data is likely to remain sluggish, with retail sales falling -0.2% YoY, fixed-asset investment down -5.2% YoY ytd, and industrial production dropping 4.7% YoY. We expect this to translate into second-quarter GDP growth of roughly 4.6% YoY.
Key events in Asia next week
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