The Bank of Korea (BoK) meets on Thursday, August 27 at 01:00 GMT. The central bank is expected to keep its 7-day repo rate unchanged at 0.5%. As we get closer to the release time, here are the expectations predicted by economists and researchers at four big banks. USD / KRW fell this week from 1192.20 to levels around 1186 ahead of the meeting.
“We expect the BoK to keep its key rate at 0.50%. While economic data has shown signs of improvement, the recent surge in virus cases threatens to jeopardize the recovery. Monetary policy should remain accommodative, although any additional support is likely to come through non-rate tools. “
The BoK is expected to keep its 7-day repo rate unchanged at 0.5%. We do not see any change in the stance of the BoK’s monetary policy given the uncertain economic outlook. As we see upside potential for growth, a second wave of COVID-19 cases could present downside risks. The OECD recently updated Korea’s growth forecast for 2020 as Korea has been able to deal with COVID-19 better than expected. However, the number of cases has increased recently and there is a risk of a partial lockdown in the Seoul metropolitan area. Due to this circumstance, we believe that the BoK will not change its monetary policy but will adopt a wait and see attitude. In the meantime, rising house prices and the gap between real and financial markets will likely be discussed at the meeting for the future direction of policies. “
After cutting interest rates by a total of 125 basis points, to 0.50%, from the year to May, the BoK took a break at the last meeting held in July. We also don’t think they’ll move next week, which is the broad consensus as well. A possible second wave of the epidemic could tip the scales towards easier macroeconomic policy, although our view remains that the BoK’s easing cycle has run its course.
“The economy is still under great pressure, but there are signs of a temporary improvement as in industrial production and consumer confidence. A new wave of Covid-19 cases has complicated matters and will likely have a negative impact on recovery. Inflation remains low, but the BoK is aware of increased household indebtedness and it is unlikely to rush to cut rates again. “