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MNI BOK WATCH: Further Pause At 3.5% Expected; Policy In Focus

(MNI) Tokyo

The Bank of Korea monetary policy board will consider holding its policy rate unchanged at 3.50% at its Nov 30 meeting for the seventh straight session, as concern over the slower economy grows and despite still strong inflation, observers tell MNI.

The market will watch closely how Governor Rhee Chang-yong communicates the BOK's outlook on future monetary policy, however, near-term rate cuts remain unlikely, they said.

“[Rhee] will likely keep his stance of closely monitoring economic and inflation developments without prediction,” said a person familiar with the Korean economy and monetary policy.

The bank will likely not move toward policy easing immediately as rate cuts could increase household financial debt, which has stayed high, the person noted.

South Korea’s consumer price index rose 3.8% y/y in October, accelerating from 3.7% in September, the third straight rise driven mainly by higher food prices. Core CPI, however, showed signs of stabilising.

Another expert said the higher food prices were temporary and will likely slow in future, taking pressure off inflation.


Policymakers will also update their medium-term economic growth and inflation rate forecasts at the next meeting.

While exports recovered in October, rising 5.1% for the first time in 13 months, 2023 GDP will likely not reach the BOK's 1.4% growth prediction, forcing officials to revise their forecasts down. The BOK expects GDP to grow 2.2% in 2024.

GDP rose 0.6% q/q in Q3, the third straight rise following Q2's 0.6% and Q1's 0.3% rise, indicating achieving the BOK's 1.4% growth target this year will be difficult. Rhee has suggested the BOK may revise its 2024 GDP target, depending on developments in the Chinese economy and the Middle East.

The Korean Development Institute, a governmental think tank, lowered its GDP forecast in 2024 to 2.2% from 2.3% made in August.

MNI Tokyo Bureau | +81 90-2175-0040 |
MNI Tokyo Bureau | +81 90-2175-0040 |

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