Bank of Korea Preview: Four major banks expectations

The Bank of Korea (BoK) meets on Thursday, 27 August at 01:00 GMT. The central bank is likely to keep its 7-day repo rate unchanged at 0.5%. As we get closer to the release time, here are the expectations forecast by the economists and researchers of four major banks. The USD/KRW pair has been retreating this week from 1192.20 to levels around 1186 ahead of the meeting.

ANZ

“We expect the BoK to keep its policy rate on hold at 0.50%. While economic data have shown signs of improvement, the recent spike in virus cases threatens to undermine the recovery. Monetary policy will need to remain accommodative, though any additional support is likely to be through non-rate tools.”

Standard Chartered

“The BoK is likely to keep its 7-day repo rate unchanged at 0.5%. We do not see a change in the BoK’s monetary policy stance given the uncertain economic outlook. While we see potential upside to growth, a second wave of COVID-19 cases could pose downside risks. The OECD recently upgraded Korea’s 2020 growth forecast, as Korea was able to manage COVID-19 better than expected. However, the number of cases has risen recently and there is a risk of partial lockdown in the Seoul metropolitan area. Owing to this circumstance, we think the BoK will not change its monetary policy but will adopt a wait-and-see stance. In the meantime, rising housing prices and the discrepancy between real and financial markets will likely be discussed at the meeting for future policy direction.”

ING

“After cutting interest rates by a total of 125 basis points, to 0.50%, in the year through May, the BoK paused at the last meeting held in July. We don’t think they will move next week either, which is also the broad consensus. A possible second wave outbreak may tip the balance towards easier macro policy, though our house view remains that the BoK easing cycle has run its course.”

TDS

“The economy is still under severe pressure, but there are signs of a tentative improvement such as in industrial production and consumer confidence. A renewed wave of Covid-19 cases has complicated matters and will likely adversely impact recovery. Inflation remains soft but BoK is cognisant of increased household indebtedness and is unlikely to rush to lower rates again.”