BoK Preview: Forecasts from five major banks, the end of the hiking cycle?

The Bank of Korea (BoK) will hold its Monetary Policy Committee (MPC) meeting on Friday, January 13 at 01:00 GMT and as we get closer to the release time, here are the expectations as forecast by the economists and researchers of five major banks. 

BoK is expected to hike rates by 25 basis points to 3.5%. At the last policy meeting on November 24, the bank hiked rates by 25 bps to 3.25%.  

Standard Chartered

“We expect the BoK to hike rates by 25 bps. We expect the BoK to continue hiking the base rate on inflation concerns despite slowing growth momentum. As of now, we think the BoK will prioritise CPI inflation concerns over growth concerns, maintaining its hawkish stance.”

TDS

“We think the BoK is nearing its terminal rate as growth concerns take hold, with exports contracting for the trade-reliant nation. While Dec’s headline inflation still remains above the BoK 2% target at 5% YoY, inflation has cooled rapidly from the highs in Jul'22. The BoK may opt to stick with an elevated policy rate of 3.5% for longer rather than continuing to hike rates.”

SocGen

“The BoK is expected to hike rates by 25 bps to 3.50% at its policy meeting on 13 January, which is likely to mark the end of its rate-hike cycle. We have reduced our terminal policy rate forecast from 3.75% to 3.50%. The data continue to indicate weak economic activity and peaking inflation. The concerns surrounding financial stability have persisted due to high corporate leverage and housing market weakness, which would be bearish for growth outlook. Meanwhile, a further decline in the USD/KRW exchange rate reduces the pressure on the BoK to follow the Fed’s tightening cycle.”

ANZ

“We expect the BoK to conclude its current rate hike cycle with a 25 bps increase this Friday, which will take the policy rate to 3.50%. Nonetheless, the odds that the central bank will stand pat have also risen.”   

ING

“We maintain our minority view that the BoK will likely stand pat this time. Since the last meeting, both inflation and inflation expectations decelerated quite meaningfully while the Korean Won stabilised under the 1300 level despite a widening yield gap between the US and Korea. The BoK is expected to use the rate hike card more carefully as there is little room left to raise interest rates in this cycle given sluggish exports and economic activity. However, given the recent rise in gasoline and power prices, upside risks remain high and thus the BoK should retain a hawkish tilt despite the pause.”