Bank of Korea Seen Holding Rate at 3% This Week

The Bank of Korea is widely expected to keep its benchmark interest rate unchanged at 3 per cent when its Monetary Policy Board meets on Thursday, October 22, pausing after two consecutive hikes in July and August, according to analyst surveys published on Sunday. All six economists polled by Yonhap News Agency forecast a hold, and all six expect the central bank to resume tightening in November, the Korea JoongAng Daily reported.

Separate polls point the same way. Money Today said all 11 bond-market specialists it surveyed expect the rate to stay put this week, with eight of them predicting a rise in November and nine seeing the current cycle topping out at 3.5 per cent. A Seoul Economic Daily survey of 20 economists, professors and market experts found 19 expecting a hold and 18 naming November as the month of the next increase.

Why a pause rate now

The case for waiting rests on cooler price pressures and a steadier currency. Park Seok-gil of JPMorgan Korea pointed out that core inflation, which strips out food and energy, eased to 2.8 per cent in September from 3.4 per cent in August, while the won has held around 1,330 to the US dollar. Ahn Jae-kyun of Korea Investment & Securities said there was “insufficient justification for an additional hike” for now, citing that currency stability.

Joo Won of the Hyundai Research Institute argued the bank is likely to step back to gauge the impact of its earlier moves, warning that a third straight increase could weigh heavily on households and businesses.

Even so, headline consumer inflation remains above the Bank of Korea’s 2 per cent target, and Governor Shin Hyun-song told lawmakers at a parliamentary audit last week that inflation is likely to stay above that level for a considerable period, adding that the bank would decide on the timing and pace of further increases. Several analysts told Money Today that one board member, Jang Yong-seong, could dissent in favour of a hike on Thursday.

Tightening bias intact

Most forecasters believe the tightening cycle has further to run. Daishin Securities economist Gong Dong-rak told Money Today that the rate-hike trend, or “the cycle itself remains valid”. Ahn Ye-ha of Kiwoom Securities said strong semiconductor-led growth and oil-driven inflation favour more increases, adding that the peak could reach 3.75 per cent if high oil prices persist. Others, including SK Securities and IBK Investment & Securities, see a lower terminal rate of 3.25 per cent as currency volatility subsides.

The Seoul Economic Daily survey found that 16 of its 20 respondents regard core inflation as the deciding factor for policy. Its panel’s outlook has also turned more hawkish since August: 13 now expect the rate to reach 3.5 per cent by the first half of 2027, while two see 3.75 per cent.

What’s next

Beyond Thursday’s decision, markets will watch South Korea’s third-quarter GDP figures due at the end of October, which respondents to the Seoul Economic Daily poll expect to show growth of more than 1 per cent on the quarter, as well as the US Federal Reserve’s late-October meeting. Hyundai Research Institute’s Joo said a strong Fed signal of a December hike could prompt the Bank of Korea to move in November.

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