JP Morgan "Korea's BoK Base Rate Expected at 2.25% in Q1 Next Year"

Q3, Q4, and Q1 of next year each expected to increase by 0.25%p

Joo Sang-young, Acting Chairman of the Monetary Policy Committee, is presiding over the Monetary Policy Committee meeting held at the Bank of Korea in Jung-gu, Seoul on the morning of the 14th. 2022.04.14. Photo by Joint Press Corps

[Asia Economy Reporter Hwang Yoon-joo] JP Morgan, a global investment bank (IB), forecasted that the Bank of Korea will raise the base interest rate by 0.25 percentage points in the third and fourth quarters of this year and the first quarter of next year, resulting in a base rate of 2.25% in the first quarter of next year.

Park Seok-gil, Head of JP Morgan's Financial Market Operations Department, explained in a report published on the 14th, "Instead of focusing on the schedule for the new governor's inauguration, the Bank of Korea raised the rate by 25bp (0.25 percentage points) on April 14, concentrating on economic outlook," adding, "The rising inflation risk and aggressive tightening forecasts by major foreign banks likely prompted the Bank of Korea's swift action."

Park predicted, "Despite the upward revision of inflation forecasts, the base interest rate in Korea is still expected to be 2.25% by the end of 2023," and "The timing to reach 2.25% will be the first quarter of next year, which is one quarter earlier than previously expected."

He added, "This reflects a hawkish bias due to increasing inflationary pressures," and "Since the Bank of Korea has taken the lead in raising rates relatively early since last year, there is room to end the rate hike cycle earlier than other central banks."