SocGen Sees BoK Cut More Likely In Nov

The French bank updates its thinking on the timing of the BoK cut post yesterday's policy meeting. See below for more details.

SocGen: "The timing of the first rate cut is more likely to be November than October, in our view
The clear dilemma or a trade-off between falling inflation and rising house prices supports our
base scenario of the first BoK rate cut being in 4Q24. Increasing confidence that inflation will
return to the target would lead to the first rate cut within this year, while increasing concerns that
the excessive house price rally will be repeated would effectively rule out the chances of an
August cut.

Now the remaining question is on the exact timing of the first rate cut. We think that the first cut
is more likely to take place in November than in October. There are three factors that support our
view. First, October could be still too early to have confirmation of the stabilisation in house
prices via the various regulatory measures, including the tightening of stress DSR (Debt Service
Ratio) that was postponed from July to September. Right after the BoK meeting, we heard the
news that the weekly rate of increase in Seoul apartment prices jumped further from 0.20% to
0.24%.

Second, there is the “forward guidance” that four board members do not expect a rate cut
within three months. Note that the next policy meeting will be held on 11 October, exactly three
months later. Third, our base scenario for the Fed is for a first cut in 1Q25. When the Fed cuts will
also affect the likely timing of the BoK’s first cut. Though Governor Rhee appeared to downplay
the importance that the Fed’s decision would have on the BoK’s policy, we believe that no Fed
rate cut in September raises the chances of no BoK rate cut in October. Note that the market
consensus is for a first Fed rate cut in September."