SEOUL, October 19 (AJP) — The Bank of Korea (BOK) will likely wait to assess the impact of back-to-back rate hikes at its first rate-setting meeting since the latest increase, even as hot U.S. inflation data bolstered the odds of another Federal Reserve hike on Oct. 27–28, an AJP poll of seven economists found.
Governor Shin Hyun-song too projected policymakers will likely stay pat at Thursday's meeting, and economists agreed as a third consecutive increase would be excessive with domestic inflation below 3 percent and bond yields more stable.
During a parliamentary audit last week, Shin said the central bank’s preemptive moves had eased the pressure to respond to further U.S. Federal Reserve rate hikes, while keeping additional hike possibility open depending on the inflationary pressures.
“The hold would not signal the end of monetary tightening, but rather a brief pause,” said Kim Ji-na, a fixed-income analyst at Eugene Investment & Securities.
The BOK delivered a rare quarter-point increases in July and August that lifted the benchmark rate from 2.50 percent to 3.00 percent.
With a pause already priced in, the bond market will scrutinize the BOK’s post-meeting statements for clues to how far and how long the tightening cycle will run.
The three-year bond yield fell 0.9 basis point to 3.845 percent, while the 10-year yield dropped 1.7 basis points to 4.165 percent at the end of Monday’s morning session. Both remained well below their recent peaks of 4.126 percent and 4.605 percent, respectively.
Of six respondents who specified when they expect the next move, five forecast another quarter-point increase in November, while one sees either November or January as the likely window.
Among six who provided a view on the peak rate, four expect 3.50 percent, one forecasts 3.75 percent and another says 3.75 percent remains possible if semiconductor-led growth stays strong.
The survey points to broader agreement on the direction of policy than on the pace of tightening. Respondents generally view an October hold as a chance to assess the lagged effects of the two earlier increases, rather than a signal that the cycle is over.
Hot U.S. inflation data have also complicated the backdrop ahead of the Federal Reserve’s Oct. 27–28 meeting.
The BOK cited stronger-than-expected growth, persistent inflation and financial stability risks when it raised rates in August.
Its outlook that month projected economic growth of 3.3 percent this year and 2.9 percent next year, supported by strong semiconductor exports and investment. It forecast consumer inflation at 2.7 percent and core inflation at 2.5 percent this year.
The central bank’s six-month conditional rate outlook also pointed to further tightening, although at a relatively gradual pace.
Of 21 dots published in August, five were at 3.00 percent, 10 at 3.25 percent and six at 3.50 percent, leaving the median at 3.25 percent. Shin said at the time that the median implied roughly one additional increase over the following four meetings.
Some economists see a steeper path.
JPMorgan economist Park Seok-gil expects three more quarter-point hikes — in November and once each in the first and second quarters of next year — taking the benchmark rate to 3.75 percent.
Kiwoom Securities analyst Ahn Ye-ha also sees room for a higher peak if the current expansion proves durable.
“If semiconductor-led growth continues, the possibility of raising the rate to 3.75 percent should remain open,” Ahn said.
Thursday’s vote split could offer a more immediate signal.
Of four respondents who explicitly forecast the vote, two expect one Monetary Policy Board member to favor an immediate hike, while two expect a unanimous hold.
Shinyoung Securities economist Cho Yong-gu expects one dissenting vote for an increase, while NH Investment & Securities analyst Kang Seung-won forecasts a unanimous hold. Both nevertheless expect tightening to resume in November and the rate eventually to reach 3.50 percent.
The October meeting will not include a new six-month conditional rate projection, which the BOK releases alongside its quarterly economic outlook in February, May, August and November.
That leaves the vote split, policy statement and Shin’s press conference as the main clues to whether policymakers are leaning toward the higher rate paths forecast by private economists.
The next formal update comes Nov. 26, when the BOK holds its final scheduled rate-setting meeting of the year.
For markets, the focus this week will be less on the expected pause than on how clearly the BOK signals that it is temporary.
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