Bank Of Korea Maintains Interest Rate

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Bank Of Korea Maintains Interest Rate

Bank Of Korea (Bok) Maintains 3.50% Interest Rate, Hints At Policy Pivot.

The latest meeting of the Bank of Korea (BOK) led to no change in the interest rate, which is near 3.50%. However, BOK hinted that it will soon start the phase of monetary easing, which is in line with other central banks worldwide.

After the BOK announcement, the bond futures of South Korea showed a little upside. Overall, that's the 8th meeting in a row that the interest rate was maintained at 3.50%. The decision aligned with the economist's forecasts as BOK has shown no signs of rate cuts in the past.

No Rate Cuts In Next 6 Months

Earlier, BOK announced that it would look at the conditions to gauge whether more rate hikes are needed. But after the recent comments, a policy pivot is expected in the next few months. The bond yields of South Korea didn't like the talks about rate cuts and thus were trading lower.

After the press conference, the governor of BOK didn't provide any exact date and time for the rate cuts. However, he added that he sees no chance of rate cuts during the next six months.

According to the governor, rushing into the rate cuts can increase the risk of higher inflation & and would put economic growth at risk.

Based on the comments from BOK, rate cuts will likely occur during Q3 2024. However, others think that it will happen way before that!

When asked why to expect earlier rate cuts, an economist said that inflation continues to decline due to a weak economy. In addition, lower oil prices have also allowed South Korea to lower inflation levels further.

It may not look like it, but the Fed's policy will be used as guidance to determine BOK's next move. So, if the Fed goes ahead with rate cuts, the same can also be expected from the BOK.

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