[Financial Policy Committee poll] ① Bank of Korea rate cut timing delayed... 10 consecutive freezes expected

20 Economic Experts Forecast Unanimous Bank of Korea April Rate Hold
US Also Expected to Hold May Interest Rate
Rate Cut Timing Pushed Back

Economic experts expect the Bank of Korea's Monetary Policy Committee (MPC) to keep the base interest rate unchanged at 3.5% for the '10th consecutive time' at its meeting on the 12th. With inflation still exceeding the target and the U.S. economy strengthening more than anticipated, the timing for interest rate cuts in both South Korea and the U.S. is expected to be delayed.

On the 7th, Asia Economy conducted a survey from the 1st to the 5th among 20 economic experts, including domestic and international securities analysts, bank and economic research institute economists. All respondents predicted that the Bank of Korea would keep the base interest rate at 3.5% at this month's MPC meeting. The Bank of Korea has kept the base rate unchanged for nine consecutive times in February, April, May, July, August, October, and November last year, and January and February this year.

Consumer Price Inflation Exceeds Target, Low Possibility of Rate Cut in Q2

Experts believe that since the consumer price inflation rate still significantly exceeds the Bank of Korea's target of 2%, and with recent rises in agricultural product prices and international oil prices, the uncertainty surrounding the future path of price stability has increased, making it difficult to lower the base interest rate in the near term.

Kim Seon-tae, an economist at KB Kookmin Bank, said, "Although the inflation rate is decelerating relatively quickly, domestic and international growth rates are being revised upward, potential inflationary pressures increase whenever market interest rates fall, and the exchange rate is rising," adding, "The MPC will start cutting rates only after inflation is sufficiently stabilized and U.S. rate cuts are confirmed."

Ahn Jae-gyun, a researcher at Shinhan Investment Corp., stated, "Concerns about a sharp rise in oil prices need to be limited for confidence to build in the path toward 2% inflation," and added, "South Korea is likely to attempt normalization of monetary tightening only by the third quarter."

Many experts also forecast that the Bank of Korea will have room to cut rates only after the U.S. Federal Reserve (Fed) clearly moves to lower its base interest rate.

Kim Eung-tae, a research fellow at Hana Financial Management Research Institute, explained, "Unlike the U.S., South Korea has seen a sharp decline in core inflation due to weakening demand-side pressures, which sets the environment for a policy shift," but added, "Considering the burden of preemptive rate cuts before the U.S. lowers its rates and the Bank of Korea governor's commitment to managing household debt, we expect Korea to cut rates after the U.S. does."

Baek Yoon-min, a researcher at Kyobo Securities, said, "Internally, the MPC has somewhat met the conditions for a monetary policy shift, but external factors are preventing a hasty decision," and noted, "If expectations for a Fed rate cut in June become clearer, the Bank of Korea might preemptively cut rates in May."

U.S. Also Expected to Keep Rates Steady in May, Rate Cut Anticipated in June

Experts unanimously expect the U.S. Fed to keep the base interest rate unchanged at the May Federal Open Market Committee (FOMC) meeting. Fourteen respondents predicted the U.S. would cut rates in June this year, eight expected it in the third quarter, and two gave multiple answers including June or the third quarter.

Kim Ji-na, a researcher at Eugene Investment & Securities, emphasized, "Although March indicators will be confirmed before the May FOMC, the likelihood of shockingly negative data is very low, so the FOMC will not decide on the rate direction without any signals," adding, "We expect rate cuts as early as June or July."

Jo Young-moo, a research fellow at LG Economic Research Institute, predicted, "The U.S. economy is strong and inflation concerns have not yet been resolved," and said, "Rates will likely be cut around the third quarter when inflation declines and economic slowdown signs appear."

Moon Hong-chul, a researcher at DB Financial Investment, explained, "Despite high rates, the U.S. economy is improving, delaying rate cuts," and added, "At least 1 year and 6 months must pass after the peak rate for the effects of high rates to become visible, so it is not yet time to cut rates."

South Korea's Rate Cut Timing Pushed to Q3, Expectations Delayed

Among the experts surveyed, 18 out of 20 identified the third quarter of this year as the timing for South Korea's base rate cut. In the February survey, about four experts expected a rate cut in the second quarter, but this number dropped to one in the current survey, indicating a delay in expectations for rate cuts. This is closely related to the delayed timing of U.S. rate cuts.

Kim Seong-su, a researcher at Hanwha Investment & Securities, said, "If the U.S. delays its rate cuts, South Korea's rate cut possibility may shift from July to August."

Woo Hye-young, a researcher at Ebest Investment & Securities, evaluated, "With recent strong U.S. economic indicators, the likelihood of Fed rate cuts being delayed is increasing," and added, "Further delays in Fed policy shifts can be seen as changes in external variables, thus reducing the Bank of Korea's monetary policy room."

Joo Won, head of the Economic Research Office at Hyundai Research Institute, said, "The biggest variable affecting the timing of South Korea's rate cuts is the timing of U.S. rate cuts," and added, "We expect the U.S. to cut rates first, followed by South Korea one or two months later."

Experts Responding to Asia Economy's MPC Poll (20 people)

Gong Dong-rak, researcher at Daishin Securities; Kim Seon-tae, economist at KB Kookmin Bank; Kim Seong-su, researcher at Hanwha Investment & Securities; Kim Sang-hoon, researcher at Hana Securities; Kim Eung-tae, research fellow at Hana Financial Management Research Institute; Kim Ji-na, researcher at Eugene Investment & Securities; Moon Hong-chul, researcher at DB Financial Investment; Park Sang-hyun, researcher at Hi Investment & Securities; Park Seok-gil, economist at JP Morgan; Baek Yoon-min, researcher at Kyobo Securities; Ahn Ye-ha, researcher at Kiwoom Securities; Ahn Jae-gyun, economist at Shinhan Investment Corp.; Oh Seok-tae, economist at Soci?t? G?n?rale (SG); Woo Hye-young, researcher at Ebest Investment & Securities; Yoon Yeo-sam, researcher at Meritz Securities; Jung Seong-tae, research fellow at Samsung Securities; Jo Young-moo, research fellow at LG Economic Research Institute; Jo Yong-gu, research fellow at Shin Young Securities; Joo Won, head of Economic Research Office at Hyundai Research Institute; Heo Ji-soo, senior researcher at Woori Financial Management Research Institute