South Korea: BoK keeps rates unchanged – UOB

UOB Group’s Economist Ho Woei Chen, CFA, assesses the recent interest rate decision by the Bank of Korea (BoK).

Key Takeaways

In line with consensus and our expectation, Bank of Korea (BOK) extended its interest rate pause to the fourth straight meeting today with the benchmark 7day repo rate staying at 3.50%.  

It also continued to maintain a tightening stance with all the board members open to a further 25-bps hike to bring the terminal rate to 3.75%. Although inflation is on a downtrend, the risk factors on prices and household debt still exist.  

The central bank maintained its GDP growth and headline inflation forecasts for 2023 at 1.4% and 3.5% respectively. Core inflation is projected to continue its slowing trend but may turn out to be slightly higher than the May forecast of 3.3%.  

Considering the soft economic outlook and the general slowdown in inflation, we continue to expect the BOK to stay on hold for the rest of 2023. We think a rate cut could come into view in 1Q24. The next monetary policy meeting will be held on 24 Aug.