The Bank of Korea is expected to shift towards a hawkish stance in its six-month outlook for the benchmark interest rate, indicating the possibility of two rate hikes within the year.
According to the dot plot released on May 28, 19 out of 21 projections are set above the current rate until November. This suggests that most members of the Monetary Policy Committee anticipate a rate increase within the next six months.
The dot plot includes projections from seven committee members, including Governor Shin Hyun-song, each providing three estimates. The most common projection is 3.00%, with 10 members indicating this rate, while seven members projected 2.75%. Two members suggested rates of 3.25% and 2.50%, respectively.
If these projections hold true, the likelihood of a rate increase has risen, with at least three members forecasting two hikes by November. The committee has maintained the current rate during its last six meetings, including those held in July, August, October, and November of last year, as well as January, February, and April of this year.
However, given the robust economy and rising inflation pressures due to the conflict in the Middle East, the committee hinted at a tightening monetary policy. In its decision statement, the committee noted, "Future monetary policy will be determined by assessing the extent of inflationary pressures, the trajectory of economic improvement, and financial stability conditions."
During the rate decision process, five committee members voted to maintain the current rate, while members Jang Yong-seong and Yoo Sang-dae expressed a minority opinion favoring an increase to 2.75%.
Looking ahead, there are four scheduled monetary policy meetings before November, including those in July, August, October, and November. The dot plot, introduced in February, will be released quarterly in conjunction with economic forecasts in February, May, August, and November. Each committee member may project all three estimates at the same rate or distribute them across different levels.
In the previous dot plot released in February, 16 out of 21 projections clustered around the current benchmark rate of 2.50%, indicating expectations for a rate freeze. At that time, four projections were at 2.25%, and only one was at 2.75%. The significant shift in this latest dot plot is interpreted as a response to the Middle Eastern conflict and strong semiconductor exports.
* This article has been translated by AI.
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