Meritz "Bank of Korea Expected to Cut Interest Rates Again in January Next Year"

Expectations Grow for 2025 Interest Rate Floor at 2.00%
Supplementary Budget Size Expected to Expand from Existing 10 Trillion to 30 Trillion

Yonhap News

Meritz Securities forecasted on the 16th that the Bank of Korea will cut the base interest rate in January 2025.

Yoon Yeo-sam, a researcher at Meritz Securities, stated, "Concerns about the slowdown of the Korean economy in 2025 are increasing amid ongoing domestic political turmoil," adding, "Considering this, there is a growing possibility of comprehensive economic stimulus measures involving not only monetary policy but also fiscal policy."

Researcher Yoon explained, "As I have emphasized before, once the political turmoil subsides, the exchange rate will stabilize, and the timing of the base rate cut could be moved forward from February next year to January," adding, "Recently, the Governor of the Bank of Korea has also hinted at the possibility of more proactive policy responses, expressing concerns about economic contraction in the fourth quarter of this year."

Currently, the 3-month forward rate has fallen below the base interest rate of 2.75%. This increases the likelihood of three consecutive rate cuts in January.

Researcher Yoon analyzed, "Considering this, the lower bound of Korea's base interest rate next year will be lowered to 2.00% from the previous forecast of 2.25%," adding, "At the same time, the supplementary budget is also expected to increase significantly from around 10 trillion won to around 30 trillion won."