Rhee Chang-yong, governor of the Bank of Korea The Bank of Korea (BOK) is widely expected to cut interest rates by 25 basis points on Thursday amid the nation's softening economy and moderating inflation, a poll shows.
Some respondents betting on a quarter-point reduction predict a tight call on the rate decision. JPMorgan, UBS and BNP are also not ruling out the possibility that the central bank will leave interest rates unchanged at 3.00% this month.
They said the weakness in the Korean currency could pressure the BOK to hold off on further rate moves after two rate reductions last year.
According to a survey by the Korea Center for International Finance, six out of eight investment banks forecast a 25-basis-point rate cut to 2.75% on Jan. 16.
Goldman Sachs said the BOK’s rate decision will primarily be based on weakening growth momentum and further potential downside risks in domestic demand.
It said household debt growth, the biggest headache for the BOK last year, is decelerating due to a slowdown in housing transactions.
“Notwithstanding the recent US dollar strength on the prospect of moderating Fed easing, we do not expect forex considerations to constrain the BOK’s room for policy changes as much as before,” Goldman said in a note released on Monday.
The Kospi index added 0.31% to close at 2,497.40 on Tuesday. The Korean won has been flirting around the 1,400 level to the dollar since December 2024 By contrast, Nomura and Barclays bet on an interest rate freeze as they see wild fluctuations in the domestic foreign exchange market posing a greater threat to local companies and financial markets.
In a separate survey of 20 economists conducted by The Korea Economic Daily on Tuesday, 12 respondents predict the BOK to cut interest rates by 25 basis points this week.
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