JP Morgan "Bank of Korea Big Step in July... Year-end Interest Rate Forecast at 3.0%"

[Asia Economy Reporter Seo So-jung] Global investment bank (IB) JP Morgan forecasted that the Bank of Korea will take a 'big step' by raising interest rates by 0.5 percentage points at once in July.

On the 15th, Park Seok-gil, Head of JP Morgan's Financial Market Operations Department, stated in a report, "Following the big step in July, the Bank of Korea will raise the base interest rate by 0.25 percentage points in August, October, and November, reaching 3.0% by the end of the year."

He also expected the Bank of Korea's base interest rate to reach 3.25% in the first quarter of next year.

In last month's forecast, JP Morgan anticipated that the Bank of Korea would raise the base interest rate three times by 0.25 percentage points each within the year, reaching 2.5% by year-end, and complete the final increase in January next year to reach 2.75%. However, in this forecast, these figures were each revised upward by 0.5 percentage points.

Park explained that the minutes of the Bank of Korea's Monetary Policy Committee released the day before suggested that the members would proactively respond to inflation risks going forward. He further predicted that even if the Bank of Korea does not take a big step in July, it will raise rates by 0.25 percentage points until February next year, reaching a final rate of 3.25% in the first quarter of next year.

Park said, "JP Morgan's revised annual Consumer Price Index (CPI) inflation forecast is 5.2%," adding, "The inflation rise path is steeper than at the Monetary Policy Committee meeting in May, and since more aggressive policy rate hikes are expected in the U.S. in the third quarter, the Monetary Policy Committee will also consider a higher base interest rate in July."

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