Korea skyline

Korea Monetary Policy May 2024

Korea: Bank of Korea decides to hold rates in May

At its meeting on 23 May, the Monetary Policy Board of the Bank of Korea decided to keep the Base Rate unchanged at 3.50%.

The decision not to cut interest rates was primarily influenced by inflation which is still above the Central Bank’s 2.0% target. Moreover, the Bank judged upside inflation risks to have increased due to exchange rate volatility and faster economic growth. On the flipside, further monetary tightening was not warranted given that both headline and core inflation have trended down in recent months, despite remaining above the Central Bank’s target.

The Central Bank indicated that it will maintain a restrictive monetary policy stance for a sufficient period until it is confident that inflation will converge on the target level. Most of our panelists now only expect rate cuts to ensue from Q4 this year, with between one and two 25-basis-point cuts expected by end-2024.

Goldman Sachs analysts are at the more dovish end of our panel:

“We continue to expect BOK to start its cutting cycle with a 25bp cut in Q3 […]. While our baseline scenario remains for the start of easing in July, it would be a close call with August as an alternative, depending on the pace of disinflation over the summer, changes in monetary policy directions of major central banks, and exchange rates of the Korean won.”

In contrast, Nomura analysts see the Bank on hold for longer:

“We maintain our forecast for a 25bp cut in October and two 25bp cuts in 2025, which would take the policy rate to 2.75% from the current 3.5%.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest