The Bank of Korea’s Monetary Policy Board delivered its first base rate hike in three and a half years, prompting a wave of analyst forecasts that additional tightening this year is all but certain, with October emerging as the consensus timing. Market attention has shifted from the hike itself to signals from the central bank regarding the possibility of a consecutive move in August and the terminal rate level.<\/p>\n
On July 16, the Monetary Policy Board voted unanimously to raise the base rate by 25 basis points to 2.75%. In its monetary policy statement, the Bank of Korea used the phrase “timing and pace of additional hikes,” clearly signaling the potential for further tightening ahead.<\/p>\n
Kim Sung-soo, an analyst at Hanwha Investment & Securities, said, “Inflation is expected to remain elevated for six months to as long as one year, and growth forecasts are likely to be revised upward, making additional rate hikes this year a certainty.” He added, “We maintain our forecast for further hikes in October this year and January next year.” Kim noted that “if the August revised growth outlook reaches 3.0%, there is a risk of a rebound in market rates, but under a scenario of two additional hikes, the uptrend in short-term yields will be limited.”<\/p>\n
Kang Seung-won, an analyst at NH Investment & Securities, emphasized the importance of next week’s second-quarter GDP and Gross Domestic Income (GDI) figures. “If Q2 GDP and GDI significantly exceed the Bank of Korea’s forecasts, we cannot rule out the possibility of a consecutive hike,” he said, while adding, “I am skeptical, however, about whether we will see clear deterioration in inflation indicators driven by demand-side pressure before the August Monetary Policy Board meeting.” Kang said, “Data ‘confirmation’ appears crucial to the Bank of Korea’s policy decisions,” and forecast that “the August meeting will likely result in a hold, albeit with a dissenting vote in favor of a hike, with an additional increase coming in October.”<\/p>\n
Lim Jae-kyun, an analyst at KB Securities, shared a similar view. “The Bank of Korea is concerned about second-round effects from elevated oil prices and demand-side inflationary pressure from improving incomes, but neither factor has yet been clearly confirmed,” he said, adding, “We expect an additional hike in October rather than a consecutive move in August.” Lim specifically noted that “the South Korean won is stabilizing somewhat due to SK Hynix ADR-related fund inflows, and while rising real estate prices are a concern, the Bank of Korea governor has stated that monetary policy alone cannot control prices, so the central bank is unlikely to respond immediately in August.”<\/p>\n
The key rationales and timing forecasts from each securities firm are summarized below.<\/p>\n
Securities FirmAnalystAdditional Hike Timing ForecastKey RationaleHanwha Investment & SecuritiesKim Sung-sooOctober, January next yearSustained high inflation and upward revision to growth outlookNH Investment & SecuritiesKang Seung-wonOctoberImportance of data confirmation; difficulty verifying inflation deterioration by AugustKB SecuritiesLim Jae-kyunOctoberSecond-round effects and demand-side pressure unconfirmed; won stabilization<\/p>\n
Analysts at major securities firms unanimously pointed to October rather than August as the likely timing for the next hike, citing the Bank of Korea’s cautious, data-dependent approach. With the next Monetary Policy Board meeting scheduled for August 27, the only major indicators due for release in the interim are second-quarter growth figures and July consumer price data. Experts believe this window is insufficient to adequately confirm key variables such as demand-side inflationary pressure or second-round effects from elevated oil prices.<\/p>\n
Meanwhile, given that this rate hike was widely anticipated, some observers suggest that Monetary Policy Board-related upward momentum on rates will weaken somewhat in the near term. Kim Sung-soo commented, “As the meeting contained few surprises, we expect Monetary Policy Board-related upward momentum to fade for the time being.” However, the possibility remains that market rates could rebound if the August revised economic outlook pushes the growth forecast to 3.0%.<\/p>\n
Ultimately, the future path of monetary policy rests on actual data from the twin pillars of inflation and growth. The Bank of Korea’s reference in its statement to the “timing and pace” of additional hikes is interpreted as conveying a strong commitment to tightening to the market, while simultaneously displaying strategic ambiguity by signaling that specific actions will depend on incoming data. Market participants are accordingly expected to remain highly attentive to next week’s preliminary Q2 GDP release and early August consumer price trends.<\/p>\n","protected":false},"excerpt":{"rendered":"The Bank of Korea’s Monetary Policy Board delivered its first base rate hike in three and a half…\n","protected":false},"author":2,"featured_media":88241,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[456],"tags":[845,12729,846,4054,46512,9077,46510,466,46509,46511,2397,986],"class_list":["post-88240","post","type-post","status-publish","format-standard","has-post-thumbnail","category-bank-of-korea","tag-bank-of-korea","tag-base-rate","tag-bok","tag-consumer-price-index","tag-gross-domestic-product-gdp","tag-hanwha-investment-securities","tag-kang-seung-won","tag-kb-securities","tag-kim-sung-soo","tag-lim-jae-kyun","tag-monetary-policy-board","tag-nh-investment-securities"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/88240","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=88240"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/88240\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/88241"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=88240"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=88240"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=88240"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}