(Seoul=Yonhap Infomax) Ahead of the Bank of Korea’s final rate-setting Monetary Policy Board meeting of the year in November, market consensus strongly favors a hold. According to a Yonhap Infomax survey of 18 domestic and international financial institutions (see screen number 8852), all respondents expect the base rate to remain unchanged at 2.50% this month. This marks a sharp shift from the October survey, when about 80% of participants anticipated a rate cut in November. However, views are split on the likelihood of a rate cut next year: nine expect a 25bp reduction by March, while the other nine forecast rates to remain steady.


Financial Stability Concerns Drive Rate Hold Expectations

The main reason for growing market expectations of a rate hold is persistent concern over financial stability. The USD/KRW exchange rate continues to test the 1,500 won level. Even when South Korea’s benchmark KOSPI index opens sharply higher, it often loses momentum in the afternoon due to foreign selling and currency volatility. In response, the Ministry of Economy and Finance, Bank of Korea, other foreign exchange authorities, the Ministry of Health and Welfare, and the National Pension Service have launched a four-party consultative body to discuss measures to counteract the rapid depreciation of the won stemming from increased overseas investments by the National Pension Service.


Real Estate Market Remains a Risk Factor

The real estate market is another source of concern. Although transaction volumes have declined and price gains have slowed following the October 15 policy measures, underlying bullish sentiment remains problematic. The November Housing Price Outlook CSI fell to 119, its first decline since July, immediately after the June 27 real estate measures, but it remains well above the long-term average of 107. The index surged from 109 in July to 122 in October. Experts warn that unless the chronic supply shortage is addressed, the seller’s market will persist. Some expect the market to remain under pressure through the first half of next year, with the June 3 local elections seen as a potential turning point, possibly accompanied by tax reforms.


Positive Growth Outlook Limits Need for Rate Cuts

There are also positive factors limiting the case for rate cuts. The International Monetary Fund (IMF) projects South Korea’s economy will grow 1.8% next year, entering a recovery phase and gradually returning to its potential growth rate. The IMF cites accommodative monetary and fiscal policy, improved consumer sentiment post-election, reduced domestic and external uncertainties, and the full effect of this year’s supplementary budget as tailwinds. Barclays has raised its 2025 growth forecast from 1.7% to 2.1%, while Morgan Stanley projects 1.9%—both above the Bank of Korea’s estimated potential growth rate of 1.8%.


Global Political Landscape and Liquidity Outlook

Next year’s US midterm elections, effectively a referendum on President Donald Trump, could increase trade and geopolitical risks, but Trump is likely to adopt a different approach than in his first year in office. Recent phone talks between US and Chinese leaders signal a shift. New governments in South Korea and Japan are also entering their second year. For President Lee Jae-myung to achieve his campaign pledge of KOSPI 5,000, foreign investors must return to the domestic equity market, making currency stability essential. In Japan, new Prime Minister Sanae Takaichi, who inherits Abenomics, is expected to roll out her economic policies in earnest. Given these political dynamics, there are no signs of a sharp contraction in global liquidity for economic stimulus. If the risk of a sharp downturn in domestic and global economies remains low, the need for preemptive, insurance-style rate cuts is questionable.


(Digital News Editor) liberte@yna.co.kr

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