Bank of Korea to go for second big hike on Wednesday: Reuters poll

BENGALURU, Oct 7 (Reuters) – South Korea’s central financial institution will decide to go huge once more and hike charges by one other half-point subsequent week, pushing borrowing prices increased than earlier predicted to help a weakening received and uninteresting its impact on inflation, a Reuters ballot confirmed.

That change in forecasts comes within the wake of widening price differentials with an aggressive U.S. Federal Reserve which has hinted it might hold charges increased for longer.

Already down over 15% this yr, the Korean received was anticipated to drop one other 1.6% by end-2022, a separate Reuters ballot confirmed. That precipitous fall got here regardless of the Financial institution of Korea (BOK) elevating rates of interest by 200 foundation factors since final August.

However expectations had been for the BOK to remain the course and proceed to hike rates of interest over the approaching quarters.

An awesome majority of 88% of economists, 23 of 26, within the Oct. 4-6 ballot predicted the BOK to hike its base price by 50 foundation factors to three.00% at its Oct. 12 assembly. The remaining three anticipated a smaller rise of 25 foundation factors.

“Warding off FX pass-through onto CPI inflation would be the high precedence for the Financial institution of Korea in the course of the remaining interval of the present climbing cycle,” famous Kathleen Oh, economist at Financial institution of America Securities.

“The central financial institution is now set to vary its authentic course of baby-step hikes to a 50bp hike, transferring with the mighty hawks on the Fed.”

The median forecast within the ballot confirmed the bottom price going to three.25% by year-end after which peaking at 3.50% within the first quarter of 2023. That predicted high price was increased than the two.75% forecast in an August ballot.

Almost half of economists, 12 of 25, anticipated the bottom price to succeed in 3.75% in Q1 of subsequent yr, suggesting the bias was towards borrowing charges climbing increased as inflation at 5.6% in September from the identical month a yr in the past was far above the BOK’s goal of two.0%.

“A comforting pullback in inflation will take time, and the BOK has made clear that inflation will stay its high precedence if it stays between 5-6%,” famous Krystal Tan, economist at ANZ.

The ballot additionally confirmed inflation to common 5.2% and three.0% this yr and subsequent, increased than the 5.0% and a couple of.7% predicted in a July ballot.

South Korea’s financial system was anticipated to develop 2.6% in 2022 and 1.9% in 2023 in contrast with 2.5% and a couple of.4% forecast within the earlier survey.

(For different tales from the Reuters international long-term financial outlook polls package deal:)

Reporting by Shaloo Shrivastava in Bengaluru
Polling by Devayani Sathyan and Anant Chandak
Modifying by Matthew Lewis

Our Requirements: The Thomson Reuters Belief Rules.