Bank of Korea interest rate outlook varies ahead of policy meeting

Market indicators and analysts present differing outlooks ahead of the Bank of Korea's upcoming monetary policy meeting. Based on bond and interest rate swap indicators, there is a 62.2% probability that the central bank will raise the base interest rate, which currently stands at 3.00%.

Conversely, Hana Securities forecasts a unanimous decision to freeze the rate at 3.00% during the October meeting. This freeze is viewed not as an end to the tightening cycle, but as a pause to assess the impact of previous hikes. Analysts suggest that if inflation pressures persist and economic recovery strengthens, additional hikes could occur in November and February, potentially reaching a terminal rate of 3.50%.

Key economic factors influencing the decision include the September consumer price inflation rate of 2.9% and the GDP gap, which turned positive in the second quarter. While inflation has slowed slightly from August, it remains above the Bank of Korea's 2% target. The central bank's decision will likely focus on signaling the future path of monetary policy in response to domestic inflation and economic growth.