South Korea: BoK expected to keep the steady hand this week – UOB

Economist at UOB Group Ho Woei Chen, CFA, comments on the upcoming monetary policy meeting by the Bank of Korea (BoK).

Key Takeaways

“Bloomberg’s consensus poll shows 9 out of 19 analysts expecting a 25 bps hike to South Korea’s benchmark base rate at the upcoming monetary policy meeting on Thursday (26 August). The Bank of Korea (BoK) has started to turn more hawkish in May, citing an unsustainably low interest rate and risks of financial imbalances. The central bank has also indicated readiness to start interest rate normalisation as soon as August.”

“The market has priced in a 25 bps benchmark rate hike in South Korea by end-2021 and sees another 25 bps hike by end-2Q22.”

“While it is clear that there is a good chance that the BoK could lift interest rate from its record-low level this Thursday, we think that a more likely outcome will be another pause this Thursday with a hike only at the following meeting in October while the BoK continues to reaffirm its positive growth outlook and hawkish stance at the August meeting.”