South Korea’s rate polls point to an October pause after consecutive increases
Economists expect the Bank of Korea to leave its policy rate at 3 per cent at its October meeting while assessing the effects of its July and August increases. All six respondents in Yonhap’s survey and all 11 in Money Today’s separate poll forecast a pause. Expectations for November differ between the two samples; neither survey represents a central-bank decision.
Economics & Markets··Midday
October meeting follows two increases
Economists in two separate surveys expected the Bank of Korea, South Korea’s central bank, to leave its policy rate at 3 per cent at its October meeting. All six participants in Yonhap’s survey forecast a pause at Thursday’s meeting, while all 11 bond-market experts surveyed by Money Today expected unchanged rates on 22 October. The polls were published on 18 October. Respondents pointed to the need to assess the effects of consecutive increases in July and August.[1], [2]
Money Today’s respondents differed over the likely vote. Of its 11 experts, 6 expected a unanimous decision and 5 considered a dissenting vote for an increase possible. Shinyoung Securities economist Jo Yong-gu thought board member Jang Yong-sung could favour raising rates, while expecting the overall decision to be a pause.[2]
Economists weigh household burdens and the exchange rate
Joo Won of Hyundai Research Institute said a third consecutive increase could place a substantial burden on households and domestic companies. JPMorgan Korea economist Park Seok-gil cited lower core inflation and the won’s appreciation against the dollar. In his assessment, the stronger currency helped offset higher oil prices. Korea Investment & Securities analyst Ahn Jae-kyun also considered the stabilisation of core inflation and the exchange rate insufficient grounds for an immediate further increase despite strong growth.[1]
November forecasts retain a tightening bias
All six Yonhap respondents expected another increase in November. In Money Today’s separate sample, 8 of 11 expected a November increase. For year-end, 8 Money Today participants forecast 3.25 per cent and 3 forecast 3 per cent; 9 expected the tightening cycle to end at 3.5 per cent. Kiwoom Securities researcher Ahn Ye-ha cited semiconductor-led growth and expensive oil in Yonhap’s survey. Governor Shin Hyun-song had said the previous week that inflation, economic trends and financial stability would guide the timing and pace of further increases.[1], [2]
Money Today also recorded different views of the endpoint. Ahn Ye-ha said prolonged expensive oil could lift the terminal rate to 3.75 per cent. SK Securities’ Won Yoo-seung and IBK Investment & Securities’ Jung Yong-taek instead expected 3.25 per cent. Jung raised the possibility of a policy change after the middle of next year.[2]
