Korea Investment & Securities has predicted that the Bank of Korea will keep its base interest rate unchanged at the November Monetary Policy Board meeting, the final monetary policy decision of the year, citing “financial imbalances” as the reason. The company also expects the GDP growth rate for next year to be projected at 1.8%, and the Consumer Price Index (CPI) inflation rate at 2.0%.
Choi Jiuk, a researcher at Korea Investment & Securities, stated in a report titled “October Monetary Policy Board Minutes: Hints for the Bank of Korea’s November Economic Outlook” on November 12, “The base rate was kept unchanged in October due to financial imbalances. The same logic is expected to apply in November.”
Choi first pointed out that the minutes of the October Monetary Policy Board meeting, released the previous day, included the observation that “most board members argued for maintaining the base rate, citing the continued strong rise in housing prices in the Seoul metropolitan area and increased volatility in the foreign exchange sector, such as exchange rates.” However, he added, “Shin Sung-hwan, a member of the Monetary Policy Board, presented a minority opinion in favor of a 25bp rate cut, arguing that, given the likely contraction of the metropolitan housing market due to strong housing market stabilization policies, the focus should be on the sluggish economic growth.”
Accordingly, Choi diagnosed, “Financial stability risks will continue to be the most important reason to keep the base rate at 2.50% at the final Monetary Policy Board meeting of 2025, scheduled for November 27.” He added, “Despite the conclusion of investment negotiations with the United States, volatility in the exchange rate has further increased since the October meeting due to the weak Japanese yen and outflows of portfolio funds. The current rate of increase in Seoul real estate prices is also not enough to ease the Bank of Korea’s concerns.”
He also noted that all board members took a cautious stance on the domestic economic recovery in the October meeting minutes, and that, despite recent robust semiconductor exports, two members cited the global semiconductor market as a source of uncertainty for growth. He added, “In the ‘economic situation assessment’ section of the minutes, the relevant Bank of Korea department pointed to the possibility of U.S. semiconductor tariffs and excessive competition in artificial intelligence (AI) investment as downside risks.”
He went on to say, “What is noteworthy is that some Monetary Policy Board members mentioned upside risks to inflation. After the October consumer price data was released, the Bank of Korea stated that inflation would stabilize around 2% toward the end of the year and early next year, but in the November economic outlook process, they will pay closer attention to upside risks.”
The Bank of Korea is also expected to release its economic outlook for 2026 at this month’s meeting. The GDP growth forecast for next year is expected to be raised by 0.2 percentage points to 1.8% from the previous August forecast of 1.6%. The CPI inflation forecast for the same year is estimated at 2.0%, up 0.1 percentage points from the previous projection.
Choi explained, “Since the August economic outlook, the government budget bill, which includes expansionary fiscal policy, has been announced. The forecast also takes into account the upward revision of second-quarter GDP growth, third-quarter growth exceeding expectations, and strong semiconductor exports.” He added, “Even if the growth forecast is raised to 1.8%, considering the output gap in 2026 will remain slightly negative, the possibility of a future base rate cut should still be left open.”
Meanwhile, Korea Investment & Securities’ forecasts for 2026 GDP growth and CPI inflation are 1.9% and 2.0%, respectively.
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