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Korea Monetary Policy October 2023

Korea: BOK holds fire at October meeting

At its meeting on 19 October, the Bank of Korea (BOK) kept the base rate unchanged at 3.50%. The decision was unanimous and matched market expectations.

The BOK expects inflation to continue to decline ahead, pushing it to leave the base rate unchanged. Specifically, in its press release announcing the decision, the BOK said it expects inflation to ease to just above 3% later this year from current levels, before continuing to gradually moderate in 2024.

In its forward guidance, the BOK retained its hawkish tone, stating that it would “maintain a restrictive policy stance for a considerable time with an emphasis on ensuring price stability”. That said, further rate hikes are not expected, and most of our panelists expect the BOK to start cutting its policy rate by Q2 2024.

The next BOK meeting is scheduled for 30 November.

Analysts at Nomura said: “As we expect rising oil prices to exacerbate the slowdown in consumption in coming months, we expect policy dissent to become more evident, and eventually to lead to rate cuts. We maintain our view that the BOK will lower its policy rate to 2.5% by end-2024 from 3.5% currently.”

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