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Korea Monetary Policy January 2024

Korea: BOK stands pat at January meeting

At its meeting on 11 January, 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 its inflation forecasts—largely unchanged from those last made in November—which suggest inflation will average above target in 2024.

In its forward guidance, the BOK said it would no longer consider hiking rates, with the board unanimously in favor of holding rates stable over the next three months. In a post-meeting press conference, BOK Governor Rhee Chang-young stated that he did not anticipate rate cuts for at least the next six months. In accord with this, our panel expects the BOK to begin cutting its policy rate in Q3 2024, slightly later then the Q2 2024 that they had projected after the BOK’s last meeting in November.

The date of the next BOK meeting is 22 February.

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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