South Korean Won: Cautious tightening path expected from BoK – DBS
DBS economists Taimur Baig and Radhika Rao expect the Bank of Korea (BoK) to raise its base rate by 25bps to 3.00% at the August meeting, alongside upgraded Gross Domestic Product (GDP) and Consumer Price Index (CPI) forecasts.
DBS economists predict the Bank of Korea (BoK) will increase its base rate by 25 basis points to 3.00% during the August meeting, along with revised economic forecasts. They anticipate stronger-than-anticipated first-half GDP growth, persistent core inflation, and rising housing prices. However, they also acknowledge the possibility of a hawkish hold due to tightening financial conditions and the South Korean Won's appreciation.
DBS economists believe the BoK could raise its 2026 GDP growth growth forecast from 2.6% to around 3.5%, and extend its 2027 CPI inflation forecast to nearly 3.0%. They caution that the BoK remains cautious about the risk of inflation staying above its 2% target for too long. While a hawkish hold at the meeting is not impossible, it is mainly attributed to recent financial market tightness, KRW appreciation, and heightened KOSPI volatility.
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