(Seoul=Yonhap Infomax) Hye Rim Pi—BNP Paribas expects the Bank of Korea to lower its benchmark interest rate by 25 basis points at the Monetary Policy Board meeting scheduled for November 27.


The French investment bank maintained its forecast for the terminal rate at 2.25%.


Yoon Ji-ho, Senior Economist at BNP Paribas, stated in a report released on the 21st, “We anticipate the Bank of Korea will cut the base rate by 25bp to 2.25% at the November Monetary Policy Board meeting,” adding, “We expect the central bank’s policy stance to shift toward a more neutral tone.”


Yoon projected that one or two board members may advocate for holding rates steady.


He highlighted the negative output gap as a key factor.


“The negative output gap could lead to a 25bp rate cut in November,” Yoon said. “While our projections indicate that GDP growth in 2026 will slightly exceed potential, we believe a more accommodative rate is necessary to ensure the recovery proceeds as expected.”


He further analyzed, “If the Bank of Korea maintains a neutral policy guideline after a rate hold in November, tighter financial conditions could dampen the recent recovery in growth momentum.”


Yoon noted that the positive impact of the fourth-quarter supplementary budget is fading, while U.S. tariffs are exerting downward pressure on the economy, which could moderate growth.


He expects the Bank of Korea to revise its GDP growth forecasts for this year and next to 1.0% and 1.8%, respectively.


Meanwhile, the consumer price inflation outlook is expected to be revised upward to 2.1% for this year and 2.0% for next year.


“Even if the Bank of Korea holds the base rate in November, we expect its forward guidance to remain similar, keeping the option open for further cuts depending on growth trends and financial stability,” Yoon added.


phl@yna.co.kr


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