Are Interest Rate Hikes Really Bad News? CPI Fell, So Why Can't They Stop? The 'Real Inflation' the Fed is Watching | Hong Seon-ae, Shinhan Investment & Securities Dr. Kim Hyo-jin

Summary

Hong Seon-ae hosts Shinhan Investment & Securities Dr. Kim Hyo-jin to discuss USD/KRW, US Treasury yields, inflation, and whether rate hikes are actually bearish for stocks. Kim sees the won's sharp rally as normalization with fair value near 1,290 and limited further downside. He argues US 10-year yields are tracking a Taylor Rule estimate near 5.1%, making near-term rate cuts unlikely, and he frames a September Fed hike as painful but better for KOSPI by year-end.

• USD/KRW fell from about 1,560 to 1,340 as an abnormal dollar/won gap normalized.
• Korea's current account surplus remains very large, supporting a stronger won.
• Kim estimates fair USD/KRW near 1,290 and expects a mostly 1,300-1,400 range unless trade accelerates.
• US 10-year Treasury yields are following the Taylor Rule, with fair value near 5.1%.
• Broad PCE inflation components are still rising, so a soft CPI print may not quickly stabilize yields.
• Kim sees a September Fed hike with hawkish rhetoric as preferable to prolonged uncertainty and better by year-end.
• Historical comparisons show KOSPI suffered in 2022-23 when hikes were late/fast, but rallied after early gradual hikes in the 2010s.