81% of Bond Experts Expect Bank of Korea to Keep Base Rate Steady in February

Photo by Korea Financial Investment Association

[Asia Economy Reporter Kum Boryeong] More than 80% of bond experts predicted that the Bank of Korea's Monetary Policy Committee would keep the base interest rate unchanged on the 27th.

The Korea Financial Investment Association announced the 'March 2020 Bond Market Indicators' on the 25th. This survey was conducted from the 12th to the 18th. Out of 86 institutions and 200 individuals engaged in bond holding and management, 52 institutions and 100 individuals responded.

The base interest rate major economic indicator (BMSI) improved to 119.0 compared to 101.0 in the previous month. 81.0% of respondents expected the Bank of Korea to keep the base interest rate unchanged this month, while 19.0% anticipated a rate cut.

The interest rate outlook BMSI was 125.0, slightly improved from 120.0 in the previous month, indicating a modestly better bond market sentiment related to market interest rates.

Regarding the inflation BMSI, it significantly improved to 124.0 from 90.0 in the previous month. However, unlike the consumer price inflation rate rebounding to the 1% range for the first time in 13 months, the spread of the novel coronavirus infection (COVID-19) has increased downward pressure on prices, resulting in a higher proportion of respondents expecting price declines in March. 31% of respondents anticipated price decreases, up 21 percentage points from the previous month, while the proportion expecting price increases fell by 13 percentage points to 7.0%.

The exchange rate BMSI declined slightly to 92.0 from 97.0 in the previous month, indicating a slight deterioration in bond market sentiment related to exchange rates. Due to COVID-19, demand for the safe-haven US dollar has expanded, acting as a factor weakening the Korean won. Consequently, the proportion of respondents expecting exchange rate declines in March decreased. 10.0% of respondents expected exchange rate declines, down 5 percentage points from the previous month, while those expecting stable exchange rates increased by 5 percentage points to 72.0%.