BOK to hold base rate at 3.50 at Aug. 24 meeting

BENGALURU, Aug 22 Reuters The Bank of Korea will leave its key policy rate unchanged at 3.50 for a fifth consecutive meeting on Thursday and hold it steady for the rest of this year as inflation continues to ease and household debt remains high, a Reuters poll found.

With inflation easing to 2.3 in July, the lowest in over two years and close to the BOK39;s 2.0 target, financial markets are also indicating a tightening cycle that took rates up 300 basis points in 17 months is over.

Despite the central bank39;s expectation inflation will rise in coming months, slowing economic growth and high household debt will likely deter the BOK from further hikes, instead opting for a hawkish stance to deter markets from pricing in rate cuts.

All 43 economists in the Aug. 1421 Reuters poll expected no change to the 3.50 base rate at the Aug. 24 meeting.

After the last hike in January, the base rate is expected to remain unchanged at the current level until the end of this year … As the consumer price inflation rate has entered the 2 range, the room to respond to inflation is gradually weakening, said Kong Dongrak, economist at Daishin Securities.

However, if concerns about a slowdown in economic indicators grow, expectations for a base rate cut will continue to rise, especially in the financial market. But it will only be possible in 2024.

Among economists who had rate forecasts until end2023, over threequarters, 31 of 40,…