Let's talk a little bit more about the Korean economy with our guest Skill Park. He is Korea economist at JP Morgan. He joins us from Seoul. Sakil. Thank you so much for being with us. Uh, correct me if I'm wrong, But twenty five basis points wasn't that at the low end of estimates in terms of what the
market was expecting from the Bank of Korea yesterday? Uh? Yeah, Actually the twin five basics point hike was in nine with the expectation UM the deal place to step was much moderate than what is happening in the United States because the governation sext himself explained the last time that Korea twenty five or fifty basics point hide may have a larger impact than the US given Uh, the household credits mostly UM using the term with the floating interest rates,
so the impact may be higher. So you know, I think if basics well was well expected by the market. Yeah, we were hearing a lot about the possibility of a fifty basis point increase. That's why I asked the question, particularly when you look at the latest treading on producer prices for the month of October coming in at a rate of seven point three percent year on year. So clearly at this point South Korea is still fighting inflation
in a major way. Uh, that's right. But in the high frequency data wise we do the stabilizing oil prices, and also in the coin place and side of the the constanto inflation. Actually it was quite uh strong in the summer months, but we are looking at so hopefully
we're looking at and all these signs of tapering off. Yeah, you're right, the PPI noble was strong, but the normally created CPI full of ality is so well more moderate and the PPI inflation number implied for so I'll say you have quite cautious, but still there on the right direction for uh seeing the consumer inflation gradually stabilizing for
the end of next year, I think. So to what extent do you think the b oka was guided by a lot of the stress that we have seen in the credit markets in South Korea, particularly short term credit and some of the contraction that there has been in that space with with yields UH spiking a bit, and and you know, people just don't want to own it right now. Yes, right, But actually yesterday the governor confirmed our expectation that the UK's financial market stabilize and action
should not jeopardize it's mandate to stabilized inflation. So by not injecting additional liquidity into the financial system, but by preemptively stabilizing poke it with micrometers. So we also equal the Governor's assessment that the Korean financial stability will remain. Brobostis bite the possible product a volatility event, maybe in
the short term dequdity and credit market. Actually, I have to thread the just is basically a domestic credit issue and that be okay can fully handle if they have an intention to do so. So we were talking a moment ago about the minutes of the last FED meeting. It seems as though they were taken to be pretty dubbish. And I think the market here in the States is assuming that the FED is going to downshift now to
a fifty basis point hike in December. So the level of aggression maybe not nearly as intense as it was in the beginning of the tightening cycle. That is not to say that the FED is done. We can debate what you think might be the terminal rate for the FED. Is there a number that you have in mind is it five? Is that five in the quarter, maybe as much as five and a half percent for the fed's terminal rate. UM. Actually our usc continue does have the
fat call. But besides that, the fat called the spilliver from the fat policy rate in to crean plocy rate is not mechanical UH in a sense that the BOK follows the fat rate to some degree, but that's through the inductory, through the effect market an effect market to consumer inflation spiliver and consumer inflation deliver finally to the
polist rate decisions. So it's a multi stage process. And recently what we are looking at is that there have been some stabilization of crea one trade with basket weight, that the value has been stabilized UM. I think to some degree also reflected by the market effectation about the BET terminal rate. And yes, I have to acknowledge that
that there remains some asserting piece on that. But still in the BO case A side and the UH, their decisions at least before the one is just based on that currency consideration, maybe lesser than before, while that they have some higher consideration for as you say, the domestic credit issues. So I think it des allans to bake the twin fire basics point high cnatifty. So recently we saw trade data for the first twenty days of the month.
Some of the export numbers relatively soft, I think to be okay, probably has a keen eye on semiconductor exupports. I mean, is this an area of the economy that you're watching closely? What are you seeing when you look at exports, particularly semiconductors right now? Actually we are now going through the town cycle of semiconductor in terms of nominal gals, not the real goals actually s any conduct the real expert gals and the real products and is
quite still quite strong. But what matter is now it's process in falling along with inventory def stocking globally on the memory chips though, but as you see in the past ten years or so, uh, semiconductor pricess all like always socially eating around the trend about the about the few quarters flag. So uh cautiously we're expecting that movement, the cyclical swing will come to an end by the first half of next year and the slightly recover in the second half. So yeah, that's the what is largely
are going through. We were talking a moment ago as well about the COVID story in China. The spiking cases were the record level. Many economists that we speak with on this program who focus on China are looking at a slower growth rate when you look at the extent to which exports from South Korea entered China and there may be some contraction in the demand part of that story, Are you concerned that it has the potential to hold back South Korean growth in a meaningful way? Um, you're right.
The China is one of the major trading parts in of Korea, so it's a slowdown will affect Creates expert performances next year. But what I do worry about the next year, or what I do counted for the slowdown for the Korean growth next year is the mainly consumer demand because CREATE is now done with the initial pentop
demand initiating the all year this year. And also at the same time you have two looking at slowdown in the employment growth and also feeling tightness feeling the impact of the titaned Hall of this from my chain fisical. So that's what I'm expecting, that the consumer demand is a cooling down next year, and that then maybe the major drag in terms of the expert, Yes, it will slow down, but we don't think it is a breaking down.
Interesting that the greatest risk right now is domestic when you look at the South Korean economy, so Kale Park, Korean economist for J. P. Morgan, thank you so much for joining us here on Debrey Occasia