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Korea Monetary Policy February 2024

Korea: BOK stands pat at February meeting

At its meeting on 22 February, the Bank of Korea (BOK) kept the base rate unchanged at 3.50%. The decision was unanimous and matched market expectations.

Inflation has slowed in recent months but remains above the BOK’s 2.0% medium-run target, pushing the central bank to stand pat and postpone lowering rates. In justifying its decision, the BOK also pointed towards significant upside risks to the inflation outlook from geopolitics—in a likely reference to the Gaza and Ukraine conflicts—and shifts in domestic agricultural prices and economic growth.

In its forward guidance, the BOK said it would keep interest rates steady until it was confident that inflation would converge to its target. In a post-meeting press conference last month, BOK Governor Rhee Chang-yong stated that he did not anticipate rate cuts for at least the next six months. In accordance with this, our panel expects the BOK to begin cutting its policy rate in Q3 2024.

The date of the next BOK meeting is 12 April.

Analysts at Nomura commented on the outlook:

“We maintain our forecast that the first cut will be 25bp and will take place in July, with three further 25bp cuts taking the policy rate to 2.5% by end-2024 from 3.5% currently.”

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