Bank of Korea to raise rates on Thursday as price pressures mount: Reuters poll

The emblem of the Financial institution of Korea is seen on the highest of its constructing in Seoul, South Korea, July 14, 2016. REUTERS/Kim Hong-Ji

BENGALURU, Aug 23 (Reuters) – South Korea’s central financial institution will increase its key rate of interest once more on Thursday to combat inflation, based on a Reuters ballot of economists, however they’re divided on how excessive borrowing prices might be by the year-end.

Inflation in South Korea accelerated to an nearly 24-year excessive in July of 6.3% and was anticipated to proceed to rise for a number of extra months, leaving the Financial institution of Korea (BOK) with little selection however to stay aggressive. learn extra

All however one of many 36 economists polled Aug. 16-22 forecast the Financial institution of Korea will increase its coverage price (KROCRT=ECI) by 25 foundation factors to 2.50% at its Aug. 25 assembly. One anticipated a 50 foundation level hike.

If the bulk view prevails, it will take charges to twice the place it was earlier than the pandemic.

“With headline inflation accelerating in July and core inflation rising, containing value pressures will stay a prime precedence, with price hikes on the playing cards,” famous Krystal Tan, economist at ANZ.

“We keep that the BOK’s price mountain climbing cycle will finish in 2022.”

Though inflation was anticipated to peak quickly, and with stronger development headwinds, economists had been divided on the place charges can be by the year-end. Three stated the central financial institution would cease at 2.50%, half of respondents stated at 2.75%, 14 stated 3.00% and one had a 3.25% forecast.

Most economists anticipated the central financial institution to then cease, making it one of many first main Asian central banks to finish its financial coverage tightening. The Reserve Financial institution of New Zealand, Reserve Financial institution of Australia and Reserve Financial institution of India will not be anticipated to achieve their peak charges till 2023.

“The BOK was actually on the entrance foot when it got here to the necessity for financial coverage normalisation. So, the very fact we expect them to sluggish is known as a development we anticipate to see from different central banks in our area as properly,” stated Katrina Ell, senior economist at Moody’s Analytics.

Almost 90% of respondents, 30 of 34, who answered an extra query anticipated a 25 foundation level hike in October however 53% anticipated no rise in November.

The central financial institution has raised charges by 175 foundation factors since August 2021, together with by an unprecedented half a share level in July.

That together with worries of slowing international development and weak Chinese language import demand help the case for slowing the tempo of price hikes.

Almost 80%, 21 of 27 economists anticipated charges to be 2.75% or decrease by end-2023. The median confirmed a 25 foundation level minimize within the first quarter of 2024.

Reporting by Devayani Sathyan; Polling by Anant Chandak; Modifying by Jacqueline Wong

Our Requirements: The Thomson Reuters Belief Rules.