Bank of Korea Preview: Forecast from five major banks

The Bank of Korea (BoK) meets on Thursday, November 26 at 01:00 GMT. The central bank is likely to keep its 7-day repo rate unchanged at 0.5% and as we get closer to the release time, here are the expectations forecast by the economists and researchers of five major banks. Ahead of the meeting, the USD/KRW pair is now consolidating at the key 1109/05 support.

See: USD/KRW consolidates at the key 1109/05 support – Credit Suisse

TDS

“Consumer and business confidence strengthened while IP has bounced back. Inflation pressures remain benign, offering space for BoK while there are growing concerns about the jobs market. Another concern is the strength of the KRW, but we do not expect these factors to result in further easing. Instead, we expect BoK to focus on its lending programs and liquidity measures.”

Standard Chartered

“We believe the BoK will maintain the base rate. The market is likely watching whether the BoK will cut or signal another rate cut as a pre-emptive move against the second wave of COVID infections. While we still view a cut as unlikely, we are more open to the possibility than ahead of the 14 October meeting, where the MPC stayed on hold. The economic environment is different now versus October when uncertainty was not as high. Korea posted stronger Q3 GDP growth than the consensus estimate and the BoK’s own forecast on higher net exports on a rebound in China, the US and the euro area. However, external conditions are deteriorating again due to lockdowns in major European countries and US cities. Conditions are worsening broadly as the number of new COVID cases continues to increase rapidly. As Korea’s rebound was driven by external demand, we are sceptical of a sustained rebound in Q4.”

ANZ

“We expect the BoK to keep its policy rate unchanged at 0.50%. An accommodative stance will be maintained until a sustainable recovery can be confirmed, in our view. Any further monetary accommodation, if needed, will come in the form of government bond purchases rather than conventional rate cuts.”

ING

“The BoK looks poised to leave the policy on hold.”

UOB

“Given the large fiscal response, including the 4th supplementary budget that was passed in late-September and a record budget for 2021, we maintain our expectation for the BoK to remain on hold ahead. This also takes into consideration that the economy has continued to improve, the ‘effective lower bound’ for interest rate as well as concerns over the rising household debt.”