the Bank of Korea's monetary policy committee will hold a meeting on the 27th to decide the base rate. Bank of Korea (BOK) raised the rate at the Monetary Policy Board last month to 2.75% a year from 2.5% a year, the first increase in 3 years and 6 months.
Earlier, ChosunBiz surveyed 10 domestic securities firm macro and bond experts, and 5 said the Monetary Policy Board members at Bank of Korea (BOK) would decide at the August meeting to raise the rate by 0.25 percentage points to 3%. The other 5 experts predicted that the Bank of Korea (BOK) would keep the rate unchanged this time and move to raise it in October.
If the Bank of Korea (BOK) raises the rate again this month following July, it would be the first time since April 2022–January 2023 during the COVID-19 period. To ease the surge in prices then, it began by raising the rate in April 2022 to 1.5% a year from 1.25% a year and lifted it to 3.5% a year by January 2023.
Experts who expect the Bank of Korea (BOK) to raise the rate this month cited the still-elevated level of inflation as the reason. Because of the fallout from the Middle East war, the consumer price inflation rate topped 3% in May–June before easing somewhat to 2.8% in July, but it still exceeds the Bank of Korea (BOK) inflation target (2%). Core inflation excluding petroleum products and agricultural products was 2.6% in July, the highest in 2 years and 7 months since December 2023.
If macroeconomic conditions were weak, a rate hike could be a burden, but recent indicators have been favorable. The flash estimate of real gross domestic product (GDP) growth for the second quarter was 0.6%, exceeding Bank of Korea (BOK)'s May projection (0.2%). A semiconductor boom helped. The current account surplus in June was $49.73 billion, up more than 20% from the previous month and the largest on record.
However, some analysts say the economy is not strong enough to warrant raising rates for two straight months. With consumer price inflation easing somewhat, they say it would be fine to raise the rate in October after watching the upcoming trends in prices and economic growth. The fact that the won-dollar exchange rate fell recently to the 1,390-won level from an average of 1,497.4 won in July was also cited as grounds for holding the rate.