Central Bank leaves rates unchanged in July

At its meeting on 11 July, the Central Bank decided to keep the Base Rate unchanged at 3.50%, where it has been since January 2023.

The decision was influenced by the need to further assess the trend of inflation—headline inflation, core inflation and short-term inflation expectations are still above the Central Bank’s 2.0% target—foreign exchange market volatility and the impact of increasing household debt on financial stability before countenancing rate cuts.

The Central Bank indicated a readiness to consider a rate cut at an unspecified time in the future, contingent upon factors such as inflation trends, the foreign exchange market, house prices, and household debt. Most of our panelists expect rate cuts to begin in Q4, with between one and two 25-basis point cuts penciled in by the end of the year.

On the outlook, United Overseas Bank’s Ho Woei Chen said: “We push back our rate cut call for South Korea to start in Oct rather than Aug, meaning that BOK’s rate lowering would come only after the Federal Reserve’s, should the latter kick off its policy easing in Sep in line with our forecast. We continue to see a total of 50 bps reductions this year, including another 25 bps cut in Nov.” ANZ’s Krystal Tan said: “There was little to suggest that the BoK is in a hurry to cut rates. Financial stability concerns are a growing consideration. Overall, we are sticking with our forecast for the BoK to deliver a rate cut in October.”

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