JP Morgan "Bank of Korea to Raise Interest Rate by 0.50%P at Next Month's Monetary Policy Meeting"

[Asia Economy Reporter Seo So-jeong] JP Morgan forecasted that the Bank of Korea will implement a big step (a 0.50 percentage point increase in the base interest rate) at the Monetary Policy Committee meeting next month.

In a report released on the 22nd, JP Morgan predicted that the Bank of Korea is highly likely to take a second big step next month to prevent an excessive interest rate gap with the United States.

Park Seok-gil, Head of JP Morgan's Financial Market Operations Department, said, "The Bank of Korea will raise the base interest rate by 0.50 percentage points at next month's Monetary Policy Committee meeting to prevent an excessively large policy interest rate gap with the United States," adding, "It is expected to raise the interest rate by 0.25 percentage points in November and in January and February next year, making the final base interest rate 3.75% in February during this rate hike cycle."

Until now, JP Morgan had expected the Bank of Korea to gradually raise interest rates by 0.25 percentage points at the remaining Monetary Policy Committee meetings this year, reaching a final rate of 3.25%, but this forecast has now been revised upward to 3.75%.

Park explained, "In the short term, concerns about the domestic gross domestic product (GDP) growth conditions remain largely unchanged, but as uncertainty about the U.S. monetary policy path has shifted in a hawkish direction, the rationale for the Bank of Korea's big step has increased."

However, he added, "If the September Consumer Price Index (CPI) falls short of expectations or if the downward trend of the nominal effective exchange rate suddenly stabilizes, the Bank of Korea may maintain the existing 0.25 percentage point rate hike policy rather than a big step."

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