[Economic Outlook] Focus on BOK Base Rate Hike Decision... Also Attention on Economic Growth Rate Adjustment

This Week's Major Economic Schedule

Lee Ju-yeol, Governor of the Bank of Korea, is seen striking the gavel at the Monetary Policy Committee plenary meeting held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 15th. (Photo by Yonhap News)

[Sejong=Asia Economy Reporter Moon Chaeseok] This week, the Bank of Korea's Monetary Policy Committee (MPC) will decide whether to adjust the base interest rate and also announce the Bank's revised forecasts on growth and inflation.

At the MPC meeting on the 26th, the committee will discuss whether to maintain or raise the current base interest rate of 0.5%. Following the MPC meeting on the 15th of last month, Bank of Korea Governor Lee Ju-yeol stated, "Considering the economic recovery trend, the expansion of inflationary pressures, and the accumulated risks of financial imbalances comprehensively, I think it is time to review whether it is appropriate to adjust the degree of monetary easing starting from the next (August) MPC meeting." Since there was already a minority opinion advocating for a rate hike among one of the seven MPC members in July, there is a possibility that the base interest rate increase will be decided at this MPC meeting.

However, there are still considerable opinions urging caution on raising rates, taking into account the economic contraction due to the fourth wave of COVID-19 and strengthened social distancing measures, as well as the increased household interest burden from rate hikes.

On the same day as the MPC meeting, the Bank of Korea will also release new economic forecasts. Attention will focus on how much the Bank's existing projections, such as this year's real Gross Domestic Product (GDP) growth rate (4.0%) and consumer price inflation rate (1.8%), will be revised. Additionally, on the 24th and 25th, the Bank will consecutively disclose the results of the August Consumer Sentiment Survey and the August Business Survey Index (BSI). These indicators will help gauge how much the fourth wave of COVID-19 has affected the economic sentiment of consumers and businesses.

The government is expected to announce plans to expand pre-sale housing subscriptions as early as next week. On the 11th, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki stated at the Real Estate Market Inspection Meeting of Related Ministers, "We are reviewing plans to expand pre-sale subscriptions for private housing and the supply volume under the 2·4 Plan," and predicted, "We will finalize and announce the plan within August."

The government has already increased this year's pre-sale subscription volume from the initially planned 30,000 units to 32,000 units. Next year, 30,000 units are also scheduled to be supplied through pre-sale subscriptions next week. There is also a possibility that the Tae-reung Country Club (CC) and Gwacheon alternative sites will be announced together. The government has prepared development plans for 33,000 new housing sites and is currently proceeding with procedures such as consultations with related agencies, detailed project planning, and implementation design for each site.

On the 25th, Statistics Korea will release the 2020 birth statistics. Based on 2019 data, the average number of children a Korean woman is expected to have in her lifetime was recorded at 0.92. This is the lowest figure among the 37 OECD countries and the lowest since Statistics Korea began compiling related statistics in 1970. It is estimated that this phenomenon worsened further in 2020.