38 of 40 economists expect rates to be on hold at 3.50 on August 22

BENGALURU, Aug 20 Reuters The Bank of Korea will keep its key interest rate at 3.50 on Thursday and cut it next quarter after the U.S. Federal Reserve likely begins easing in September, according to a Reuters poll.

The benchmark rate has been at 3.50 since January 2023. With inflation rising 2.6 in July from an 11month low of 2.4 in June, moving further away from the central bank39;s 2 target, the BOK may need to see prices stabilising before it starts to ease policy.

The Korean won , which has lost over 3 against the dollar this year and is one of the worstperforming emerging market currencies in 2024, was also likely to prevent the BOK from leapfrogging the U.S. Federal Reserve39;s first rate cut, which is widely expected to come in September.

A strong majority of economists, 38 of 40, in the Aug. 1319 poll forecast the central bank would keep its base rate unchanged at 3.50 on Aug. 22. The remaining two predicted a 25 basis point cut to 3.25.

Although two board members said in July they were open to rate cuts, economists cautioned such a move could exacerbate house price increases in Seoul, heightening concerns in a country with one of the world39;s highest household debttoGDP ratios, at 104.3 in the first quarter.

The BoK will continue to signal a more dovish stance, albeit cautiously, given persistent concerns about rising home prices and the associated financial stability risks, wrote…