A hold is fully expected, so the market reaction is likely to hinge on the tone of the statement and any signal on the timing of the next hike. A hawkish hold that keeps a further increase firmly on the table would likely support the won and push short-dated Korean government bond yields higher. Any hint that the cycle is nearing its end could weigh on the currency. For equities, a pause offers some relief to rate-sensitive sectors. The semiconductor-led export boom underpinning growth keeps chipmakers at the centre of the market’s growth story. A record-scale current account surplus provides an underlying source of support for the won, even as policy expectations drive day-to-day moves.
-The Bank of Korea is expected to catch its breath today rather than call time on tightening, with booming chip exports and stubborn price pressures keeping the next hike in view.
Summary:
All six economists surveyed by Yonhap expect the Bank of Korea to leave its benchmark rate unchanged today
The Bank of Korea base rate is currently 3.00%
The central bank raised rates in July and August, and a third consecutive hike would be rare
Economists expect it to keep a tightening stance, pausing to adjust the pace of policy and assess the timing of further increases
Strong semiconductor exports are driving growth, while inflation pressures are coming from both supply and demand
The tightening cycle may continue in the short term, according to the survey
South Korea’s current account surplus for January to August reached about $279 billion, nearly four times the roughly $70 billion a year earlier
Announcment due at GMT / 2100 US Eastern time
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The Bank of Korea is expected to leave interest rates unchanged at its policy meeting today, pausing after two consecutive hikes, though economists say its tightening cycle is not yet over.
All six economists surveyed by Yonhap News Agency expect the central bank to hold its benchmark rate, which stands at 3.00% following increases in July and August. Respondents said the Bank of Korea is likely to maintain its tight policy stance. However, they see a pause as more likely than a rare third straight hike, giving policymakers room to adjust the pace of tightening and judge when further increases might be needed.
The economists pointed to a backdrop that still argues for tighter policy. Strong semiconductor exports are driving economic growth, while inflation is facing upward pressure from both supply-side and demand-side factors. Taken together, those conditions suggest the hiking cycle could continue in the near term, according to the survey.
The strength of the export sector is reflected in South Korea’s external accounts. The cumulative current account surplus for January to August reached about $279 billion, nearly four times the roughly $70 billion recorded in the same period last year. The surplus highlights how heavily the economy is benefiting from global demand for memory chips and other semiconductor products, a key source of growth that has given the central bank room to tighten without derailing the expansion.
A hold would mark a shift in tempo rather than direction. Markets are likely to focus closely on the central bank’s statement and on any guidance about the timing of the next move, for signals on whether policymakers see a further hike as likely in the coming months. The balance between growth driven by strong exports and persistent price pressures will be central to that assessment, alongside the outlook for the won and domestic demand.
This article was written by Eamonn Sheridan at investinglive.com.
