The Bank of Korea opted to maintain its interest rates at 3.50% on Thursday, while also implying a willingness to commence easing measures as inflation and economic growth showed signs of moderation, setting the stage for a potential rate reduction at its October meeting.
The central bank expressed in its policy statement the need to evaluate the appropriate timing for rate reductions while adhering to a prudent monetary policy stance. Analysts anticipate the BOK to initiate interest rate cuts at the upcoming policy meeting on October 11, coinciding with the anticipated first rate cut by the U.S. Federal Reserve in four years.
Revised forecasts by the BOK reflect a downgrade in growth and inflation projections for the year. The estimated growth rate for 2024 has been adjusted to 2.4% from the previous 2.5%, following an unexpected contraction in the second quarter. Additionally, the projection for consumer inflation in 2024 was revised to 2.5%, a decrease from the prior estimate of 2.6%.
Amidst a global trend of central banks unwinding previous years’ tight monetary policies, the BOK is considering a cautious approach to rate cuts due to escalating financial stability risks.
