JP Morgan "Bank of Korea Expected to Raise Interest Rates Further in November"

[Asia Economy Reporter Jang Hyowon] Global investment bank (IB) JP Morgan forecasted on the 26th that the Bank of Korea may further raise interest rates in November.

On the same day, the Bank of Korea's Monetary Policy Committee raised the base interest rate by 0.25 percentage points from 0.5% to 0.75%.

Park Seokgil, head of JP Morgan's division, stated in a report, "We expect the Bank of Korea's gradual normalization of monetary policy to continue," and predicted, "Through additional rate hikes of 0.25 percentage points in November and the second half of next year, the rate will be raised to 1.25% by the end of next year."

He explained that the Bank of Korea "did not send a clear signal that additional action would be taken in the very near future (October meeting), but indicated that the rate hike cycle has begun."

He analyzed that the prerequisites for additional rate adjustments?▲mitigation of COVID-19's impact on domestic demand ▲need for further policy adjustments due to ongoing financial imbalance risks ▲announcement of tapering (asset purchase reduction) by the U.S. Federal Reserve (Fed) in the fourth quarter?will be met in the fourth quarter.

He added, "While COVID-19 uncertainties remain risk factors for future scenarios, the Bank of Korea appears to tolerate these risks more than the market expects," and "Unless the COVID-19 situation changes drastically, the Bank of Korea will strive to adjust financial imbalances through monetary policy normalization."

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