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(Seoul=Yonhap Infomax) Si Yoon Yoon – Standard Chartered (SC) expects the Bank of Korea to keep its benchmark interest rate unchanged in November, postponing its previous forecast for a rate cut.
Jong Hoon Park, economist at SC, told Yonhap Infomax on the 25th, “A rate cut does not appear necessary at this time,” adding, “Although real estate transactions have declined recently, property prices remain on an upward trajectory, and the dollar-won exchange rate hovering in the high 1,400 won range continues to raise concerns.”
Park further noted, “Given the impact of the exchange rate on inflation, the Bank of Korea will weigh this factor heavily. In fact, the weak won also significantly affects the equity market. Should the won depreciate further, the likelihood of a rate cut diminishes, and the need for a rate hike could even emerge.”
Particular attention is being paid to whether the Bank of Korea will revise its economic growth outlook for next year in the upcoming updated economic forecast.
With expectations high that the central bank will raise its growth forecast for 2025, sentiment around economic prospects has turned more positive.
Park stated, “The Bank of Korea could revise up its GDP growth forecasts for both this year and next by more than 0.2 percentage points. We expect next year’s growth to be raised to the 1.8–2.0% range, with inflation stabilizing around 2%.”
SC projects inflation at 2.0% for this year and 1.9% for next year. The bank’s GDP growth forecasts stand at 1% for 2024 and 2% for 2025.
Park added, “We expect growth to turn negative in the fourth quarter of this year due to fiscal tightening and a global slowdown. However, in 2025, construction sector improvement, continued AI-related capital investment, and resilient exports should support 2% growth.”
Regarding the future direction of monetary policy, Park said the bias remains toward easing rather than tightening. “The Bank of Korea is likely to keep rates on hold for now while monitoring financial markets and the growth trajectory. If forced to choose between a hike and a cut, current economic momentum suggests a higher probability of a cut,” he said.
He also cited the possibility of the US Federal Reserve cutting rates next year for political and economic reasons as a key consideration. Should the economy slow in the second half of 2026, the likelihood of a rate cut could rise again.
“While Federal Reserve board members remain divided on the outlook for rate cuts, the probability of a cut in December has recently increased,” Park explained. “The Bank of Korea will determine its monetary policy based on how Fed policy affects the exchange rate, but for now, stabilizing the real estate market appears necessary.”
He added, “Instability in the real estate market could become a major election issue next year. Both the government and the Bank of Korea will want to ensure property market stability.”
syyoon@yna.co.kr
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