The BoK has kept its rate at 3.5% since early 2023. — Bloomberg
SEOUL: The Bank of Korea (BoK) is widely expected to cut its benchmark interest rate on signs housing markets are cooling and after inflation eased below its target, joining an increasing number of global peers in starting an easing cycle to safeguard economic momentum.
Twenty of 22 economists surveyed by Bloomberg expect South Korea’s central bank to cut the rate by a quarter-percentage-point to 3.25% when the board gathers soon.
The remaining two predicted authorities will extend a record-long holding pattern until they see clearer signs that property prices will ease enough to discourage households from ramping up debt.
The BoK has kept its rate at 3.5% since early 2023. While inflation has trended lower all year, ultimately dipping below the BoK’s target, officials extended the hold pattern due to concerns over hot housing markets in Seoul.
With apartment prices and transactions having lost momentum since August, the bank is now seen as having scope to shift its focus to reviving domestic consumption.
A 50-basis-point (bps) rate cut by the Federal Reserve (Fed) last month and moves to ease policy by other central banks in countries from Canada to China have also opened the way for looser policy settings in South Korea.
“With the Fed paving the way and starting with a 50-bps cut in September, it provides more wiggle room for the BoK to ease in October,” Kelvin Lam, a Pantheon Macroeconomics analyst, said. — Bloomberg
