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(Seoul=Yonhap Infomax) Hyun Woo Roh – Macroeconomic and fixed income experts unanimously expect the Bank of Korea to keep its base rate unchanged at 2.50% at this month’s (November) policy meeting.
According to a survey conducted by Yonhap Infomax on the 21st of 18 domestic and international financial institutions (see screen number 8852), all respondents forecast the base rate will remain at 2.50% this month.
However, views diverged on the timing of a potential rate cut. Nine experts anticipate a 25 basis point reduction by March next year, while the remaining nine expect the rate hold to persist through that period.
The Bank of Korea’s monetary policy meetings for next year are scheduled for January 15 (Thursday), February 26 (Thursday), April 10 (Friday), and May 28 (Thursday).
Choi Ji-wook, economist at Korea Investment & Securities, said, “With growth forecasts for this year and next being revised upward, the Monetary Policy Board is likely to focus on financial stability amid improving economic outlook,” projecting a continued rate hold.
Park Seok-gil, economist at J.P. Morgan, noted, “Economic indicators released since the October policy meeting have partially offset the Bank of Korea’s easing bias. The growth outlook to be announced at the November meeting will likely be revised upward in line with market consensus.”
He added, “Nevertheless, the Bank will maintain communication that leaves room for further rate cuts. Should growth and inflation data through Q1 2025 diverge from the current trajectory, there is a possibility of a final rate cut in this cycle.”
Even if the Bank of Korea signals room for rate cuts, some analysts believe the impact on bond market sentiment will be limited.
Yoon Yeo-sam, research fellow at Meritz Securities, said, “With growth and inflation forecasts being revised upward overall, the improving economy itself will highlight the reduced need for rate cuts. Even if Governor Rhee Chang-yong’s remarks or the policy statement reaffirm a dovish stance, it may not significantly stabilize market sentiment.”
Baek Yoon-min, researcher at Kyobo Securities, commented, “Based on the last policy meeting and recent remarks by Governor Rhee, the Bank of Korea’s policy stance appears more hawkish than expected.”
He continued, “If financial stability risks and FX uncertainties ease, the Bank may pursue further policy easing based on fundamentals. However, given the Bank’s relatively optimistic view of the domestic economy, the timing of additional rate cuts could be later than previously anticipated.”
Market participants are also closely watching the three-month forward guidance for signals on the policy direction.
Kim Myung-sil, researcher at IM Securities, said, “Attention should be paid to any changes in the three-month forward guidance. If expectations for a rate cut are scaled back, it could dampen hopes for further easing next year and act as a negative factor for the bond market.”
hwroh3@yna.co.kr
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