Mirae Asset Global Investments has indicated that the substantial wealth generated by South Korean chip manufacturers will stimulate spending and inflation, prompting the Bank of Korea to implement at least three interest rate hikes over the next year. In a Tuesday interview, Choi Jinyoung, the firm's fixed income chief and managing director, stated that employee bonuses at chip firms, elevated chip prices, and a buoyant stock market are likely to sustain price pressures. This could lead the central bank to raise its policy rate from the current 2.5% to a peak of 3.5% by the second half of 2027. He further noted that the yield on South Korea's 10-year government bond is expected to surpass the 4% mark within the next two months, a level not seen since 2023. Samsung Electronics Co. recently reported an eight-fold surge in profits, significantly exceeding expectations, highlighting robust demand for AI memory chips despite Middle East tensions. Similarly, SK Hynix Inc. saw its quarterly profit increase fivefold. Mr. Choi remarked, "When employees at Samsung and SK Hynix receive these bonuses, where else will they spend the money?" Mirae Asset, with assets under management of approximately 339 trillion won ($228.4 billion), is one of South Korea's largest asset managers. Mr. Choi personally oversees about 9 trillion won in bonds for the company. His outlook is more hawkish than that of many market observers, a stance driven by the rapid and profound impact of artificial intelligence on the South Korean economy. Additionally, the risk of an oil shock stemming from conflict in Iran further exacerbates inflationary pressures, potentially compelling the Bank of Korea to maintain a tight monetary policy. Mr. Choi believes a significant decline in crude oil prices is unlikely. Even if hostilities involving Iran subside, supply chain disruptions will likely keep oil prices elevated. Given the current price dynamics, Mr. Choi holds a bearish view on South Korean government bonds and advises investors to avoid the "vulnerable" 5 to 10-year maturities. Conversely, he favors short-term corporate bonds with maturities of up to two years, as their yields, some exceeding 4%, already largely reflect the central bank's anticipated rate hikes. His hawkish forecast contrasts with views from other institutions: JPMorgan Chase & Co. anticipates only one rate hike by mid-2027, Citigroup Inc. expects at least two, while UOB Group projects no hike this year. Mr. Choi suggested that the background of the new Bank of Korea Governor, Shin Hyun Song, could also influence policy direction. With extensive experience in international finance and policymaking, Governor Shin has "long focused on exchange rate fluctuations and is more likely than his predecessor to consider the won's exchange rate in interest rate decisions." Governor Shin will chair his first monetary policy meeting on May 28. He assumes leadership as the broader South Korean economy shows signs of heating up. First-quarter GDP growth even surpassed the most optimistic forecasts. Mr. Choi stated this will impact inflation, noting, "Growth expectations are being revised upwards." While the Bank of Korea forecasts GDP growth around 2%, Mr. Choi believes "growth exceeding 3% is possible." He highlighted a 2.8% quarter-on-quarter increase in construction investment during the first quarter as particularly noteworthy, stating, "This sector has a massive impact on domestic demand."