the Bank of Korea's monetary policy committee on the 26th released for the first time a "dot plot" showing the interest rate outlook six months ahead. A dot plot displays the distribution of data as dots. According to the first dot plot, most of the monetary policy members expect the benchmark rate to be kept unchanged at the current 2.5% through August.
On the day, the seven Monetary Policy Board members each published three dots for their projections of the benchmark rate in August, six months ahead. There are four remaining Monetary Policy Board meetings through August: in April, May, July and August. Considering that in the past the rate was raised or lowered by up to 0.25 percentage point per meeting, the adjustment range through August is 1.5%–3.5%.
However, 16 of the 21 dots landed at 2.5%. This means a large number of monetary policy members expect rates to be kept on hold through August. Four dots landed at 2.25%. Some monetary policy members anticipate one rate cut by August. One dot landed at 2.75%, indicating there is also a monetary policy member expecting a rate hike.
The Bank of Korea (BOK) said it is introducing the dot plot to improve the predictability of future rate policy. Until now, after rate decisions, the BOK governor verbally disclosed at a press briefing the direction of rates three months ahead as anticipated by the Monetary Policy Board members. For example, at the Monetary Policy Board meeting on the previous month, Rhee Chang-yong said, "Five of the six monetary policy members saw a high likelihood that the rate would remain at 2.5% even three months ahead, while one suggested the possibility of a cut."
But critics said that with this approach it was difficult for the public to grasp the level at which the actual rate would be set. In response, the plan is to release the dot plot at the meetings to determine the direction of monetary policy every February, May, August and November.
Meanwhile, the Monetary Policy Board kept the benchmark rate at 2.5% per year. This is the sixth straight time it has held the rate at the same level, following last July, August, October and November, and this January. Given that there are four meetings to determine the direction of monetary policy scheduled through August—April, May, July and August—the likelihood has increased that the benchmark rate will be kept on hold for 10 consecutive meetings.