Australia: The minutes of the June RBA meeting need scrutinizing for any talk of rate hikes. We know they were talked about, the question is, what is the trigger? Released at 0930 SGT/HKT. We are leaning towards forecasting a hike at the August meeting.

South Korea: Consumer inflation eased more than expected to 2.4% YoY in June (vs 2.7% in May, 2.6% market consensus), while core inflation excluding food and energy held steady at 2.2% for a second month, in line with market consensus. Fresh food prices moderated more than expected from 17.4% in May to 11.7% in June. On a month-on-month comparison, its prices fell -5.4% MoM nsa. This is probably due to continued government efforts to curb fresh food prices. The government has expanded the number of directly imported fruit items, applied a quota duty for some fresh food, and provided discount voucher programmes. Gasoline prices rose 4.3% YoY, but only due to a high base last year. For petrol prices, the fuel tax cut has been also extended, but the rate of reduction was slightly reduced (gasoline 25% to 20%, diesel 37% to 30%) from July 1st, so petrol prices will rise from July.  

It is clear that inflation has moderated gradually over the past three months, as headline inflation has fallen from a recent high of 3.1% in February. As a result, we believe that the Bank of Korea will shift its communication tone from hawkish to neutral from its July meeting.  We think there could be a minor vote against a hold decision as early as July with more board members open to a rate cut in three months.  However, there are upside risks to inflation in the near term. For example, petrol prices are likely to rise from July, and some utility rates administered by local governments are scheduled to rise from July. Consequently, the Bank of Korea will likely wait and see how inflation evolves in the coming months. Also, as the pace of household debt growth has reaccelerated recently, the BoK will remain vigilant about this. We expect the Bank of Korea’s first rate cut in October 2024.