TechFlow reports, July 14, according to a foreign media survey, economists expect the Bank of Korea to implement its first rate hike in more than three years on Thursday, with another rate hike before the end of the year. South Korea's June inflation rate rose to 3.2%, hitting a two-and-a-half-year high, exceeding the Bank of Korea's 2% target for the fourth consecutive month. The inflation rate is expected to average around 3% in the second half of this year, paving the way for opening a tightening cycle. Strong economic growth, rising housing prices, and high household debt provide policymakers with room to tighten policy.
South Korea's economy grew at the fastest pace in nearly six years in the first quarter. Bank of Korea Governor Shin Hyun-song stated that given high oil prices triggered by conflicts in the Middle East, inflation is expected to exceed the Bank of Korea's target for a considerable period, making it necessary to raise interest rates. In a survey conducted from July 7 to 13, all but one of the 37 economists expected the Bank of Korea to raise the benchmark interest rate to 2.75% on July 16. Most surveyed economists (28 out of 31) expect another rate hike by the end of the fourth quarter, raising the policy rate to 3.00%. One predicted the benchmark interest rate would reach 3.25%, while the other two predicted it would remain at 2.75%. The median forecast shows that the Bank of Korea will raise the benchmark interest rate to 3.25% in the first quarter of 2027 and maintain this level at least until the end of next year, which is 25 basis points higher than the forecast in the May survey. (Jin10)
