Kiwoom Securities "Year-end Final Base Interest Rate Expected at 3.00%"

May FOMC Unanimously Expected to Keep Interest Rates Steady
Recommend Buying on Dips if 3-Year Treasury Exceeds 3.4%

Lee Chang-yong, Governor of the Bank of Korea, is striking the gavel at the Monetary Policy Committee meeting held on the 12th at the Bank of Korea in Jung-gu, Seoul. Photo by Joint Press Corps

Kiwoom Securities announced on the 17th that "the Bank of Korea's year-end terminal interest rate is expected to be 3.00%."

Researcher An Yeha of Kiwoom Securities stated, "The possibility of two interest rate cuts within the year, which is an expansion from the previously anticipated single cut, is high. The Bank of Korea also still highly evaluates the possibility of two to three rate cuts," forecasting accordingly.

Researcher An explained, "Considering the mixed economic indicators, it may take some time to confirm a slowdown in inflation indicators, but we must keep in mind the continued domestic demand slump due to prolonged high interest rates."

According to the minutes of the Monetary Policy Committee meeting in April, most members expressed the opinion that there is no need to rush rate cuts considering economic recovery and easing financial market conditions. However, one member argued that the need for rate normalization has increased to prevent the entrenchment of domestic demand stagnation and to alleviate the accumulated burden on the borrowing sector.

Researcher An analyzed, "If the inflation forecast does not significantly change in the Bank of Korea's revised economic outlook in May, it is still necessary to keep open the possibility of rate cuts in the second half of the year."

He added, "Considering this, the recently elevated interest rate level is somewhat excessive, and it is appropriate to adopt a bargain-buying strategy in the range exceeding 3.4% for the 3-year government bond."

Meanwhile, Researcher An expects the Monetary Policy Committee in May to unanimously maintain the base rate at 3.5%. He forecasted that the growth rate projection for 2024 in the revised economic outlook will be revised upward to 2.5%. He diagnosed that this adjustment will be made considering the first quarter earnings and solid export performance.

This content was produced with the assistance of AI translation services.