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Korea's legacy M2 growth hits 53-mo high, reviving liquidity concerns SEOUL, August 14 (AJP) - South Korea’s legacy broad-money measure rose 12.3 percent in June from a year earlier, its fastest pace in four years and five months, reviving concerns that liquidity is building too quickly even as the current M2 gauge remained below its long-term average. The Bank of Korea said Friday that growth in legacy M2 accelerated from 8.0 percent in December to 9.1 percent in February, 10.4 percent in April, 11.6 percent in May and 12.3 percent in June. It was the first time the measure had exceeded 12 percent since January 2022, when it increased 12.7 percent. Growth in current M2 also climbed to 6.0 percent from 5.8 percent in May, marking its strongest reading since February 2023 and the fifth consecutive increase in the annual growth rate. The current pace remained below the 7.5 percent average recorded between 2005 and 2025, making it difficult to conclude that the economy as a whole is awash with excess cash. The gap between the two measures largely reflects non-money-market fund shares, which are included in legacy M2 but excluded from current M2 following the BOK’s statistical overhaul in December 2025. Fund shares surged 64.5 percent from a year earlier and contributed 6.5 percentage points to legacy M2 growth, accounting for more than half of the 12.3 percent increase. Subtracting that contribution leaves 5.8 percentage points, broadly in line with current M2 growth and underscoring why the legacy headline cannot be treated as a like-for-like measure of cash available for immediate spending. The increase was not entirely a statistical effect, however, as narrow money M1 grew 10.0 percent from a year earlier, while financial-institution liquidity, or Lf, rose 8.5 percent and overall liquidity, or L, increased 9.4 percent. All three rates accelerated from May, suggesting that the buildup in liquidity extended beyond the investment-fund component of legacy M2. On a seasonally adjusted basis, average current M2 stood at 4,213.0 trillion won ($3.0 trillion), up 29.4 trillion won, or 0.7 percent, from the previous month after a 0.8 percent increase in May. Money-market funds rose by 7.3 trillion won, deposits with maturities of less than two years increased by 7.1 trillion won and money trusts with maturities of less than two years gained 6.3 trillion won. The central bank attributed the increases to greater use of short-term surplus funds by nonfinancial companies, higher corporate deposit holdings and inflows of funds from semiconductor companies into money trusts. By holder, money balances at nonfinancial companies jumped 45.7 trillion won and those at other financial institutions increased 5.4 trillion won. Holdings by households and nonprofit organizations fell 19.8 trillion won, while those held by other sectors, including social security funds and local governments, declined 1.1 trillion won. The composition indicates that the latest liquidity buildup was concentrated in corporate cash and financial products rather than reflecting a household-wide surge likely to flow directly into consumption. Average M1 stood at 1,402.9 trillion won, up 0.4 percent from May, while Lf increased 1.0 percent to 6,368.7 trillion won and the month-end L measure gained 0.8 percent to 8,115.3 trillion won. Current M2 remaining below its long-term average argues against declaring an economy-wide liquidity glut, but the four-year high in legacy M2 and the synchronized acceleration across other monetary aggregates strengthen the case for monitoring corporate cash and potential spillovers into financial markets. ___________________________________________________________________________________ AJP Takeaways South Korea’s legacy M2 money supply grew 12.3 percent year on year in June 2026, its fastest pace since January 2022 and its first reading above 12 percent in four years and five months. Current M2 growth reached a 40-month high of 6.0 percent but remained below its 7.5 percent long-term average, while surging fund shares accounted for 6.5 percentage points of the legacy measure’s increase. Nonfinancial companies added 45.7 trillion won to their money holdings while household balances fell 19.8 trillion won, indicating that Korea’s liquidity growth was concentrated in corporate and financial channels rather than household consumption. August 14, 2026 12: -
Korea's job market shuts out 20s as first rung of hiring narrows SEOUL, August 12 (AJP) - For many South Korean parents, the cost of supporting children no longer ends at university graduation, as college-educated young adults spend longer trying to secure steady jobs. "People my age rarely ask what their children do these days. Some of my friends have kids living with them without regular jobs five years after graduation," said Yun Mi-hyeong, a 56-year-old mother of two living in Seoul's Gangnam district. Employment among South Koreans in their 20s fell by 204,000 in July, while a 65,000 gain among people in their 30s trailed population growth of 83,000. The split does not prove that entry-level hiring is shrinking. But 45 months of falling youth employment, coupled with companies' growing preference for experienced recruits, makes the question increasingly difficult to ignore. The total number of employed people rose by 108,000 from a year earlier to 29.136 million, accelerating from a gain of 63,000 in June, the Ministry of Data and Statistics said Wednesday. Employment among people aged 15 to 29 fell by 191,000 to 3.441 million for a 45th consecutive monthly decline. Their employment-to-population ratio dropped 1.6 percentage points to 44.2 percent. Employment fell by 124,000 among 20- to 24-year-olds and by 80,000 among those aged 25 to 29. The youth population declined by 144,000, less than the drop in employment. Employment among people in their 30s rose to 5.631 million, but their employment-to-population ratio remained unchanged at 81.0 percent as population growth outpaced job gains. Their labor force grew by 108,000, while the number of unemployed rose by 42,000. The jobless rate climbed to 3.2 percent from 2.5 percent. The divide extends beyond July. Between July 2024 and July 2026, employment fell by 339,000 among people in their 20s and rose by 158,000 among those in their 30s. The monthly survey counts people who are working, not companies that are hiring. It does not track entry-level vacancies, actual hires or whether recruits entered with previous work experience. Bin Hyun-jun, the ministry's director general for social statistics, said public recruitment, a civil-service examination and new listings on Work24 drew more young people into job searches. That may explain part of the rise in youth unemployment, but not the longer decline in employment. A 2026 Korea Enterprises Federation survey found that 54.8 percent of companies planned to recruit only on a rolling basis, while 67.6 percent ranked relevant experience as their top hiring criterion. A February 2025 Bank of Korea study estimated the monthly probability of securing a permanent position at 1.4 percent for inexperienced workers and 2.7 percent for experienced workers. Its model attributed seven percentage points of the 17-point employment-rate gap between workers in their 20s and 30s to increased hiring of experienced workers. A January 2026 BOK study again cited preferences for experienced hires and rolling recruitment as factors delaying young people's entry into the labor market. For job seekers, that shift is visible before they even send an application. "In game development, large-scale recruitment has definitely fallen sharply from before," said Kim Sung-yoon, 29, who works in the gaming industry. "Most hiring is now project-based and rolling, and companies often look for people with at least one to three years of experience rather than fresh graduates." That has changed how young applicants try to enter the industry, he said. "People who used to aim straight for permanent jobs at large companies are now trying to get a foot in the industry through midsized companies, contract jobs, internships or even by moving into QA or operations just to build experience," Kim said. He said the problem is not necessarily companies advertising jobs for fresh graduates and then demanding experience. "They simply ask for experienced workers from the beginning." The corporate surveys, central bank research and experiences of applicants point to a plausible explanation for Korea's widening age divide: companies may still be adding workers while narrowing the openings accessible to people without experience. Proving that requires recruitment data broken down by age, experience, contract type and job level — information the monthly employment survey does not provide. Weakness was also concentrated in industries traditionally associated with stable employment. Manufacturing shed 68,000 jobs for a 25th consecutive month and construction lost 57,000 for a 27th. Employment among people aged 60 and above rose by 231,000, while employment among those in their 40s fell by 31,000. Health and social welfare services added 173,000 jobs. The overall employment-to-population ratio slipped to 63.3 percent, while the unemployment rate rose to 2.6 percent. Slower entry-level hiring cannot yet be identified as the cause of Korea's age divide. But with employment among people in their 20s falling for nearly four years, the lack of data on who is getting through the first rung of recruitment is becoming harder to overlook. ___________________________________________________________________________________ AJP Takeaways • Employment among South Koreans in their 20s fell by 204,000 in July 2026, while job gains among people in their 30s failed to keep pace with population growth. • Corporate surveys and Bank of Korea research show that rolling recruitment and preferences for experienced workers can put first-time job seekers at a disadvantage. • Korea's monthly employment survey does not track entry-level vacancies or actual hires by experience, leaving the impact of changing recruitment practices difficult to measure. August 12, 2026 17: -
Demand for Korea's 1-yr central bank bond hits 29-mo low SEOUL, August 12 (AJP) - Demand for South Korea's one-year central bank bond fell to a 29-month-month low Wednesday as bids missed the planned issuance, signaling that the enlarged supply could not clear at the yield the Bank of Korea was prepared to pay. The weakness lay not in participation but in the size of the bids, as 15 institutions took part, one more than in July, even as their combined orders fell 41.2 percent. The BOK received 500 billion won in bids for 700 billion won ($494 million) of one-year Monetary Stabilization Bonds, producing a bid-to-cover ratio of 71.4 percent, according to the auction results. It awarded 410 billion won to 12 institutions at a yield of 3.350 percent, leaving the final issuance at 58.6 percent of the planned amount. Bids ranged from 3.150 percent to 3.450 percent, with no partial award. At the July auction, 14 institutions submitted 850 billion won of bids for the same 700 billion won offering, allowing the BOK to issue the full amount at 3.370 percent. The average bid per participating institution therefore fell 45.1 percent in one month to 33.3 billion won from 60.7 billion won. An AJP review of 339 one-year MSB auctions since 2010 found Wednesday's bid ratio was the eighth lowest over the period and the weakest since March 2024. It was also the third undersubscribed auction in the past 12 months, following bid ratios of 97.1 percent in September 2025 and 77.1 percent in October. A 2021 Capital Market Research Institute study found that one-year MSB auctions recorded an average bid ratio of 222.6 percent over the preceding decade and fell short of planned issuance in only 5.3 percent of cases. Part of the latest decline may reflect the larger offering, as the BOK raised planned one-year issuance from 500 billion won in June to 700 billion won in July and August. That explanation is limited, however, by the July comparison, when the same amount attracted 350 billion won more in bids. The result points most directly to a pricing gap between the return investors required and the yield the central bank was prepared to accept. The 3.350 percent accepted yield was the cutoff for the 410 billion won awarded, rather than the market-clearing yield for the entire 700 billion won offering. Even if the BOK had accepted every submitted bid, the auction would still have fallen 200 billion won short, suggesting that full issuance may have required a higher yield capable of drawing additional demand or a smaller offering. The auction alone, however, cannot determine whether the gap reflected expectations of higher market rates, more attractive returns on competing short-term debt or constraints on institutions' investment capacity - according to the central bank. The result came two days after the BOK announced changes intended to improve MSB liquidity, including extending the fungible issuance period for one-year bonds to three months from two and introducing benchmark issues from Aug. 31. Because Wednesday's auction was conducted under the existing framework, sales after the changes take effect will provide the next test of whether greater tradability can revive demand or investors continue to require higher yields. __________________________________________________________________________________ AJP Takeaways The bid ratio for the BOK's one-year Monetary Stabilization Bond fell to 71.4 percent, the lowest in 29 months and the eighth lowest among 339 auctions since 2010. Participation rose to 15 institutions from 14 in July, but total bids dropped 41.2 percent and the average amount per participant fell 45.1 percent. The auction points to a pricing gap rather than a broad market shock, with post-Aug. 31 sales set to test whether improved liquidity can restore demand without higher yields. August 12, 2026 16: -
Embracing Discomfort: Real Opportunities in the Brazilian Market “I always had to be the last one.” This is a reflection from the protagonist, Zeze, in the Brazilian novel ‘My Sweet Orange Tree.’ While the context differs, the feeling of waiting to be last is not unfamiliar in Brazil. Traffic jams are common, and long lines at hospitals and banks are the norm. However, just because people are accustomed to waiting doesn’t mean they want to. The moment alternatives arise, consumers choose cost over waiting.Traditionally, our companies have viewed Brazil through three main lenses: industrial goods, consumer goods, and public demand. These approaches remain valid today. However, focusing solely on these three pillars in a market of 200 million can lead to missing significant nuances. The universal domestic market reveals what is inconvenient in everyday life and what shifts when something disappears.It is at this intersection that innovation becomes a demand. The innovation discussed here is not merely about speed. It involves alleviating surrounding inconveniences such as costs, administration, and payment, and redesigning the user experience itself. While speed may open doors, it is the subsequent process innovations that expand the market. This transformation is already evident throughout daily life in Brazil.Transportation exemplifies an innovation that expands touchpoints. Sem Parar began with automatic toll payments, but consumer response was not just about the convenience of automatic payments. It eliminated the time spent stopping, searching for payment methods, and collecting receipts, even if it meant paying a monthly fee. This experience has broadened to include payment touchpoints for parking, refueling, car washes, and drive-thrus. The public parking payment app Zul+ has also consolidated various procedures, such as related taxes, fines, and insurance, which drivers previously had to check separately, into a single interface. This goes beyond simplifying payments; it reduces the hassle of moving, parking, and managing a vehicle.Healthcare represents an innovation in operational structure. The shared consultation model has transformed the administrative aspects surrounding medical care. Mobile platforms handle appointments, while kiosks manage on-site registration, payments, and document issuance. When the time comes, the doctor meets the patient directly. This structure allows consultations to proceed without dedicated administrative staff. The burdens of space, scheduling, registration, payment, and document issuance that a solo practitioner would typically bear have shifted to the platform. As a result, doctors are no longer confined to a physical location and can provide care across various regions, while patients can see a doctor more quickly and closer to home. This innovation goes beyond merely simplifying appointments; it changes how medical personnel and facilities are utilized.The private sector is not the only one making strides. Pix is a government initiative that has reduced transaction costs for payments, broadening market options. The Brazilian Central Banks payment system, Pix, has cut down on transfer and payment delays to mere seconds, but its success is not solely about speed. It has brought transactions into the mobile realm for consumers who struggle with account openings or credit card approvals, small businesses burdened by fees and equipment, and transactions previously tied to business hours and payment confirmations. Payments for street snacks, domestic help wages, and business transactions are now moving in real-time within this payment network. Pix has already garnered over 170 million users and has emerged as a leading payment method for online purchases, surpassing credit cards. The government-built payment infrastructure has transformed both consumption and sales methods.What these developments indicate is clear: opportunities in Brazils domestic market extend beyond the products themselves. They also encompass the reduced burdens of time, cost, and procedures during the user experience, which adds value. The 200 million domestic consumers cannot be fully understood through the existing three pillars alone. While industrial goods, consumer goods, and public demand remain relevant, narrowing the target is essential to see the market clearly. To fully leverage the value of this vast domestic market, one must also recognize the common demands that lie beyond these boundaries. Such demands manifest repeatedly across various touchpoints in consumers daily lives. The fourth pillar, which alleviates discomfort and enables better choices, is crucial. Industries and products may segment the market, but experiences that reduce inconvenience unite dispersed consumers. At this juncture, the 200 million domestic consumers finally become a cohesive market./Kwon Jun-seop, Director of KOTRA São Paulo Trade Office August 11, 2026 18: -
Outgoing BOK deputy argues for tightening bias SEOUL, August 11 (AJP) - The Bank of Korea should retain tightening bias as a surge in export income feeds into domestic demand and intensifies inflation and housing pressures, its outgoing deputy said Tuesday. Senior Deputy Governor Ryoo Sang-dai said further rate lifting remained necessary, although the timing and pace of additional moves should be determined by incoming data. “We need to maintain the rate-hike stance, while deciding the timing and pace of further increases based on the data,” Ryoo told reporters. The presentation stated that the assessment represented Ryoo’s personal views rather than the BOK’s official position, limiting the extent to which it can be treated as formal guidance for the central bank’s next policy decision. The remarks nevertheless amount to a parting assessment from a sitting member of the seven-member Monetary Policy Board, with Ryoo’s three-year term set to expire on Aug. 20. The BOK raised its benchmark rate by 25 basis points to 2.75 percent in July, its first increase since November 2022, after holding it steady in April and May amid uncertainty generated by the Middle East conflict. Ryoo said the calculus shifted as higher oil prices lifted inflation while the semiconductor boom strengthened economic growth faster than expected. Recent second-quarter gross domestic product and July inflation data confirmed that the combination of solid growth and above-target price pressures remained intact, he said. The current tightening cycle differs from Korea’s previous four rate-hike periods since 2000 because an improvement in the terms of trade has produced an unusually large expansion in nominal income and the current account, according to Ryoo. Korea posted a current-account surplus of $191 billion in the first half, already 1.6 times the $123.1 billion recorded for all of last year. The BOK’s May forecast placed the full-year surplus at about $250 billion, while nominal GDP expanded 17.1 percent from a year earlier in the first quarter. Ryoo said the resulting income windfall was likely to spread gradually from exporters into consumption and investment, strengthening domestic demand even as higher interest rates weighed on borrowers. That transmission makes the inflation outlook more complicated. Oil prices are raising costs both directly and through supply chains, while the semiconductor boom is lifting wages and feeding demand for domestic services, Ryoo said. The increase in headline inflation may be smaller than the surge that followed Russia’s invasion of Ukraine, but it could prove more persistent as supply-side pressure is reinforced by stronger demand. Financial stability provides another reason to retain a tightening stance. Expectations of further housing gains and instability in rental markets have kept home prices rising rapidly in Seoul and parts of the surrounding capital region, while higher asset prices have encouraged renewed household borrowing. Seoul’s price-to-income ratio stood at 17 in the first quarter, compared with a nationwide ratio of seven, highlighting the affordability gap between the capital and the rest of the country. BOK model estimates showed that a 25-basis-point rate increase could lower household debt growth by 0.16 percentage point and housing-price growth by 0.27 percentage point. Ryoo acknowledged that further increases could raise debt-servicing burdens, particularly for vulnerable borrowers, although strong income growth should cushion the effect at the aggregate level. Monetary policy alone, however, would not be sufficient to contain housing risks, he said. Interest-rate decisions need to be aligned with macroprudential measures, housing supply and tax policies and efforts to ease Korea’s concentration of population and economic activity in the Seoul metropolitan area. Selective fiscal and financial support should meanwhile address the widening burden across industries and income groups, while the BOK’s lending programs could strengthen the transmission of monetary policy to targeted sectors. Ryoo also called for continued reform of Korea’s foreign-exchange market, saying its depth had failed to keep pace with the rapid growth in residents’ overseas investment and the expansion of domestic capital markets. The BOK should continue efforts including round-the-clock foreign-exchange trading and offshore won settlement, he said, while policymakers should use Korea’s AI-driven income gains to finance productivity-enhancing investment and prepare for longer-term structural change. ________________________________________________________________________________ AJP Takeaways Deputy Governor Ryoo Sang-dai, whose tenure ends next week, said the BOK should retain its rate-hike stance, with the timing and pace of further moves determined by incoming data. Korea’s semiconductor boom has generated record external surpluses and income growth, but the gains are increasingly feeding domestic demand and inflation. A 25-basis-point increase is estimated to reduce household debt growth by 0.16 percentage point and housing-price growth by 0.27 percentage point. August 11, 2026 15: -
Korean Economy Faces Structural Challenges, Says Bank of Korea Research Head The Korean economys long-term growth foundation is under scrutiny due to a simultaneous structural transformation driven by declining working-age population, the spread of artificial intelligence (AI), decarbonization, and global supply chain restructuring. Experts emphasize the urgent need for bold structural reforms to maintain growth momentum.In a recent interview with Aju Economy, Lee Jae-won, head of the Bank of Koreas Economic Research Institute, identified transformation as the key term that best describes the current state of the Korean economy from a long-term and structural perspective. He noted, Our working-age population has already entered a phase of decline. We are experiencing not only a demographic shift but also a digital transformation due to AI, a decarbonization transition in response to the climate crisis, and a global supply chain restructuring focused on economic security. Lee highlighted that the semiconductor boom and improved trade conditions have significantly increased real incomes, stating, The important thing is how we utilize the income and time provided by this boom. He stressed the need to solidify technological advantages in semiconductors while enhancing productivity in the service sector and small businesses, as well as addressing inefficiencies in labor market duality and capital allocation. If we delay transformation, we risk weakening our existing strengths, but if we effectively leverage the current boom, we can turn structural changes into a new opportunity for growth, he added.Regarding the current economic situation, Lee acknowledged that while the economy has entered a recovery phase, there are disparities among industries. He explained, The Korean economy has entered a recovery phase, but this recovery has not spread uniformly across the economy. It is more accurate to describe it as a strong but narrow recovery. He further noted, The income generated from increased exports manifests as corporate profits, which then spread to investments, wages, sales of partner companies, and household consumption. At this point, the speed at which the recovery broadens is more important than whether it is recovering. Lee pointed out a significant weakness in the Korean economy: the lack of ability to reallocate labor and capital to more productive firms and industries. He suggested that support for small businesses should be differentiated based on productivity improvement and growth potential, rather than providing long-term support solely because they are small. He emphasized, Now is the golden time for structural reform because the costs and resistance to reform could increase significantly after the aging population and fiscal burdens become more pronounced. The current period of increased income from the semiconductor boom is not a time to reduce the need for structural reform, but rather a time when we have the capacity to bear the short-term costs associated with reform. On the issue of real estate funding concentration, he stressed the need for a shift towards productive investment. He stated, Even with the same level of private credit, a higher proportion allocated to the corporate sector rather than households has been associated with higher long-term growth rates. Particularly, when funds are directed towards young small businesses and high-productivity firms, the growth effects are even more pronounced. Lee projected that ultra-aging would narrow the central banks monetary policy space. He explained, In a recession, the policy interest rate approaches its effective lower bound, reducing the capacity for rate cuts. Conversely, in a situation where rigid expenditures such as pensions and healthcare increase alongside government debt, raising interest rates could significantly increase the governments interest costs. This creates constraints in both directions: insufficient capacity to lower rates when needed and increased fiscal burdens when rates need to be raised. While the introduction of AI holds great potential to enhance macro productivity, Lee noted that the effects and timing of realization remain uncertain. Regarding AIs impact on the labor market and income distribution, he remarked, Rather than entire jobs disappearing, it is more likely that the tasks that make up jobs will be restructured. For young people, the first rung of the career ladder may weaken, but there is also significant potential for productivity improvement as they can quickly adapt to AI. Born in 1975, Lee Jae-won graduated from the University of Wisconsin with a degree in mathematics and economics and earned his masters and doctoral degrees in economics from Princeton University. He has served as a professor at Rutgers University, a visiting research fellow at the Federal Reserve Bank of St. Louis, and a professor at the University of Virginia before being appointed as the head of the Bank of Koreas Economic Research Institute and chief economist in 2023, gaining attention for leading the institute at a relatively young age. August 11, 2026 06:
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BOK revamps monetary bonds as market liquidity thins SEOUL, August 10 (AJP) - The Bank of Korea is out to sharpen the appeal of its policy bonds by concentrating issuance into fewer, larger benchmark securities, as outstanding central-bank debt falls below 100 trillion won ($70.6 billion) while government bonds increasingly dominate Korea’s public fixed-income market. The overhaul will also divide early redemptions into a predictable schedule and a more discretionary operation, giving the central bank greater flexibility to manage bank reserves as Korea’s liquidity conditions become less one-sided. Monetary stabilization bonds, or MSBs, are debt securities issued by the BOK to drain reserves from the financial system. Issuance withdraws liquidity, while maturity payments and early redemptions return funds to the market. The bonds have historically played an unusually prominent role in Korea because the central bank used them to sterilize liquidity generated by current-account surpluses, capital inflows and the accumulation of foreign-exchange reserves. That environment has shifted as rising demand for banknotes, larger statutory reserve requirements and the BOK’s foreign-exchange swaps with the National Pension Service have reduced the amount of excess reserves that must be absorbed. Outstanding MSBs fell from 107.29 trillion won at the end of last year to 95.16 trillion won in March, dropping below the 100 trillion-won mark for the first time since 2003. The declining stock has added urgency to a longstanding liquidity problem. Research by the Korea Capital Market Institute found that MSBs trade less actively than Korean government bonds and that turnover drops sharply after the first month following issuance. The BOK will extend the fungible issuance period for one-year MSBs to three months from two, reducing the number of new one-year securities created each year to four from six. The new securities will be dated March 1, June 1, Sept. 1 and Dec. 1, replacing the current cycle of six issue dates. Concentrating issuance over a longer period should increase the amount outstanding in each security and make it easier to trade without moving prices sharply. The most recently auctioned coupon bond in each of the one-, two- and three-year maturities will also be designated as the benchmark issue and identified in the BOK’s monthly issuance plan. The designation is intended to give investors a clearer reference price for each maturity, although it does not by itself guarantee deeper trading. Unlike primary dealers in the Korean government bond market, MSB participants are not required to provide continuous exchange quotes, and most transactions take place over the counter. The BOK said it would work with relevant institutions on further measures to promote trading in the benchmark issues. Early redemptions will be separated into two operations. A first-Tuesday operation will cover three securities selected according to a predetermined remaining-maturity schedule, while a third-Tuesday operation will cover about three securities chosen each month according to reserve and market conditions. The BOK has already conducted two buybacks in some recent months, but the overhaul formalizes the arrangement and separates predictability from discretion. Uneven demand was evident in an Aug. 7 operation, when one one-year security attracted no bids even though total offers exceeded the planned purchase amount. The approach brings the MSB market closer to the logic underpinning Korea's much larger Treasury market, where liquidity tends to concentrate in benchmark securities. The contrast between the two markets is becoming more pronounced. While MSBs are shrinking, Korean government bonds are becoming more deeply integrated into global fixed-income portfolios following Korea's entry into the FTSE World Government Bond Index. South Korean government bonds began entering the WGBI in April this year, with inclusion being carried out in eight monthly stages through November. That process is increasing the importance of deep liquidity and reliable benchmark pricing in the Treasury market as index-tracking global investors allocate money to Korean sovereign debt. Rather than competing with government bonds for scale, the BOK is trying to ensure that its smaller pool of central-bank securities does not become fragmented into increasingly illiquid individual issues. Unlike primary dealers in the Korean government bond market, MSB participants are not required to provide continuous exchange quotes, and most trading takes place over the counter. The BOK said it would therefore work with relevant institutions on additional measures to promote transactions in designated benchmark issues. The overhaul also changes the other side of the MSB market — how the BOK takes its securities back before maturity.Early redemptions will be divided into two operations. A first-Tuesday operation will cover three securities selected according to a predetermined remaining-maturity schedule, giving investors greater certainty over which bonds are likely to be bought back. A third-Tuesday operation will cover around three securities selected each month according to reserve conditions and market circumstances, preserving the BOK's ability to inject liquidity where it considers necessary. The central bank has already conducted two buybacks during some recent months, but the new system formalizes the arrangement and draws a clearer distinction between predictable market operations and discretionary liquidity management. In an Aug. 7 early-redemption operation, one one-year security received no bids even though aggregate offers across the operation exceeded the BOK's planned purchase amount, illustrating how liquidity and investor demand can vary sharply between individual MSB issues. The reform also reflects a broader transformation in the way the BOK manages reserves. A falling MSB balance does not necessarily imply easier monetary policy. The BOK raised its base rate by 25 basis points to 2.75 percent on July 16, even as the amount of structural excess liquidity requiring absorption has declined. The two developments highlight the distinction between setting the price of money through the policy rate and managing the quantity of reserves through MSBs, repurchase agreements and other open-market operations. As reserve conditions become more balanced, the BOK increasingly needs the ability to both absorb and supply liquidity rather than operating primarily in one direction. The BOK will move its one-year auction from the second Wednesday of each month to the first and shift the two-year auction in the opposite direction. The changes take effect Aug. 31 and will be reflected in the September issuance plan scheduled for Aug. 27. ___________________________________________________________________________________ AJP Takeaways The BOK will reduce the number of new one-year MSB issues to concentrate liquidity in larger benchmark securities. Early redemptions will combine a fixed schedule with a flexible monthly operation to improve reserve management. The reform addresses market liquidity but stops short of replacing MSBs with repurchase agreements. August 10, 2026 12: -
China's Central Bank Increases Gold Reserves for 21 Consecutive Months The Peoples Bank of China, the countrys central bank, has continued to increase its gold reserves for the 21st consecutive month.According to Yonhap News Agency, as of the end of July, the central banks gold reserves rose by 640,000 ounces (approximately 19.9 tons) from the previous month, reaching a total of 76.08 million ounces. This marks the largest monthly increase since October 2023.The Peoples Bank has been increasing its gold reserves monthly since November 2024. This move is interpreted as an effort to reduce dependence on dollar assets and diversify its holdings amid escalating U.S.-China competition.However, the total increase in gold reserves over the past 21 months amounts to 3.28 million ounces (about 102 tons), which is only about one-third of the increase during the previous 18-month streak.Additionally, amid rising volatility in gold prices, the valuation of the gold held by the bank as of the end of July has dropped nearly 20% compared to its peak in February, according to Caixin.Meanwhile, as of the end of July, Chinas foreign exchange reserves stood at $3.4188 trillion (approximately 4,824 trillion won), reflecting a 0.07% increase from the previous month. Authorities noted that fluctuations in the foreign exchange reserves were influenced by the decline in the U.S. dollar index and changes in global financial asset prices.* This article has been translated by AI. August 8, 2026 15:1
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US jobs test puts BOK August pause in focus SEOUL, August 07 (AJP) - Seoul's capital markets have slipped into a summer lull, leaving Friday's U.S. employment report as the most immediate test of whether the Bank of Korea can pause this month after restarting its tightening cycle in July. A sharp slowdown in U.S. hiring would weaken the case for another Federal Reserve rate increase, take pressure off the dollar and give the BOK more room to stay put. Resilient employment and wages could do the opposite, reviving expectations for back-to-back rate increases in Korea. The U.S. Labor Department is due to release its July employment report at 9:30 p.m. Korea time, with economists polled by Reuters expecting nonfarm payrolls to rise by 80,000 after a 57,000 increase in June. Unemployment is forecast to remain at 4.2 percent and annual wage growth at 3.5 percent. Estimates for payroll gains range widely from 10,000 to 140,000, while revisions to May and June could prove nearly as important as the July headline. Recent indicators have pointed to softer hiring without offering the Federal Reserve much relief on inflation. ADP reported a weaker-than-expected 44,000 increase in private payrolls in July, while the Institute for Supply Management's services employment index slipped into contraction. Its prices gauge, however, climbed sharply, confronting policymakers with slower hiring but little corresponding easing in price pressures. The Fed held its benchmark rate at 3.50 percent to 3.75 percent on July 29, but three of its 12 voting members favored a quarter-point increase. Markets on Friday were pricing roughly a 54 percent chance of a September hike. Higher oil prices and U.S. Treasury yields have further complicated the outlook. That means a modest payroll slowdown alone may not kill expectations for further tightening if unemployment stays low and wages remain firm. For Korea, the U.S. jobs report matters chiefly through what it does to interest rates and the won. A stronger-than-expected U.S. employment report in June quickly lifted expectations for Fed tightening, pressured the Korean currency and pushed up domestic long-term yields, illustrating how rapidly an American labor-market surprise can spill into Seoul. The BOK now faces a finer balance after raising its base rate by 25 basis points to 2.75 percent on July 16, its first increase in more than three years. Korean government bond yields nevertheless fell on the day of the decision, with the three-year yield dropping to 3.848 percent and the 10-year to 4.297 percent, suggesting investors did not expect rate increases to follow automatically at every meeting. The argument for an August pause gained ground this week after headline consumer inflation slowed to 2.8 percent in July from 3.2 percent in June. But core inflation accelerated to 2.6 percent, keeping the central bank wary of declaring its renewed tightening campaign finished. Growth gives the BOK room to move again if necessary. Second-quarter gross domestic product expanded 0.6 percent from the previous quarter and 3.7 percent from a year earlier, supported by the semiconductor boom and improving domestic demand. That leaves Friday's U.S. jobs report as an important external swing factor. A weak reading would likely pull down expectations for a September Fed hike, U.S. short-term yields and the dollar. A stronger won would in turn ease imported inflation pressure and give the BOK greater latitude to leave its rate at 2.75 percent on Aug. 27. A strong payroll figure accompanied by resilient wages or lower unemployment could reverse that chain, pushing up the dollar and U.S. yields and renewing pressure on the won just as Korea's core inflation and economic growth remain firm. For Korean markets, the crucial number is therefore not simply whether payrolls beat or miss the 80,000 consensus. It is whether the combination of hiring, unemployment, wages and revisions materially changes the Fed's September path — and how quickly that repricing reaches the won and Korean government bonds. The won closed daytime trading at 1,416.1 per dollar on Friday, strengthening 7.7 won from the previous session to its strongest level in about 10 months as dollar-selling pressure prevailed ahead of the U.S. report. The three-year Korean government bond yield was trading around 3.76 percent and the 10-year yield near 4.22 percent at around 3:30 p.m., with expectations for an August BOK pause anchoring the short end while higher oil prices and U.S. Treasury yields kept greater pressure on longer maturities. ___________________________________________________________________________________ AJP takeaways U.S. July jobs data could shape the Bank of Korea's August rate decision by changing expectations for the Federal Reserve's September policy move. A weaker U.S. employment report would strengthen the case for a BOK pause at 2.75 percent by easing U.S. yields, weakening the dollar and reducing pressure on the Korean won. A strong U.S. payroll and wage reading could revive expectations for another Korean rate hike as higher U.S. rates and a stronger dollar increase inflation and currency pressure in Seoul. South Korea's inflation picture remains mixed: headline CPI slowed to 2.8 percent in July, but core inflation accelerated to 2.6 percent. The won and Korean government bond yields are the key transmission channels linking U.S. employment data and Fed expectations to the BOK's Aug. 27 policy decision. August 7, 2026 16:2 -
Trump Consults Fed Chair Kevin Warsh on Iran War and Other Issues President Donald Trump has been in frequent contact with Kevin Warsh, the newly appointed chair of the Federal Reserve, seeking advice on issues including the Iran war, according to multiple sources cited by the Wall Street Journal on August 5.Reports indicate that Trump has called Warsh multiple times over several days, alternating between intense communication and periods of silence. During these calls, Trump sought Warshs insights on various topics, including the impact of the Iran conflict and the rapid advancement of artificial intelligence on the economy.However, it remains unclear whether Trump and Warsh discussed monetary policy, the Journal reported. One source noted that since Warshs nomination was confirmed by the Senate, Trump has not broached the subject of interest rates with him.Despite this, the frequency of calls between a president and a central bank chair, who is expected to maintain independence in monetary policy, is considered unusual. The Journal pointed out that in recent decades, meetings between presidents and Fed chairs have typically been formal to avoid the impression of presidential interference in monetary policy.Trump, who has advocated for interest rate cuts, has previously criticized the Federal Reserve under former chair Jerome Powell. His communications with Warsh have raised concerns about the Feds independence. Sources indicated that Warsh has often expressed a positive outlook on the current U.S. economy during his conversations with Trump. He even praised the strong growth of corporate investment at a public event last week.On the other hand, the Journal suggested that Warshs friendly approach toward Trump may be an effort to dispel the perception that the Fed is antagonistic toward the president. One source mentioned that Trump has complimented Warshs appearance after seeing him on television. Additionally, during last weeks Federal Open Market Committee (FOMC) meeting, where a decision to maintain interest rates was anticipated, Trump defended Warsh, stating he knows Warsh is trying to do the right thing, while also criticizing the Fed board, which includes former chair Powell.Meanwhile, Democratic members of the Senate Banking Committee, which oversees the Fed, asked Warsh last month if he would disclose his contact records, including communications with Trump, similar to what Powell had done. Warsh responded that he would comply with the law but declined to answer questions about whether he had spoken with Trump. He stated, The president has never attempted to influence the execution of monetary policy before I took office as chair, nor has he done so since I raised my right hand to take the oath. Even if he did, I would quietly fulfill my role. August 6, 2026 11:2
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Korea's chip windfall swells C/A to record black while foreign equity exit deepens SEOUL, August 6 (AJP) - South Korea's semiconductor-driven export boom lifted its current account surplus to a record US$191 billion in the first half, nearly four times a year earlier, even as foreign investors pulled almost $89 billion from Korean stocks over the same period in the largest sustained equity outflow on record, central bank data showed Thursday. The current account surplus widened to $49.73 billion in June from the previous record of $38.61 billion in May and more than tripled from $13.97 billion a year earlier, according to preliminary data from the Bank of Korea. The black streak has extended to 38 consecutive month, the country's second-longest run since 2000. For the January-June period, the current account surplus reached a record $191.01 billion, compared with $47.87 billion in the same period last year, underscoring this year's exceptional chip power. The external surplus, however, contrasted sharply with foreign exit from Korean stocks. Foreign investors sold a record $31.61 billion worth of Korean stocks in June, surpassing May's previous record $31.05 billion outflow. Combined with earlier months, foreigners were net sellers of $106.28 billion worth of Korean equities in the first half, underscoring continued profit-taking despite the country's export-led earnings boom. Offsetting part of the outflow, foreign investors purchased $17.53 billion of Korean bonds during the first six months, supported by inflows tied to South Korea's inclusion in the FTSE World Government Bond Index, leaving a net first-half portfolio outflow of $88.76 billion. Korean residents joined the capital flight. They bought $48.56 billion worth of foreign equities during the first half, little changed from a year-ago, while reducing holdings of overseas bonds by $4.43 billion as expectations of further U.S. Federal Reserve tightening weighed on global fixed-income markets. Reflecting those cross-border investment flows, the financial account posted a record net asset increase of $46.71 billion in June, up from $31.08 billion in May. The first-half financial account recorded a cumulative $168.66 billion net asset increase. The goods account remained the principal driver of the current account, posting a record $47.89 billion surplus after exports jumped 84.5 percent from a year earlier to an unprecedented $112.37 billion. Imports rose 38.6 percent to $64.48 billion as purchases of raw materials, capital goods and consumer products all increased. Information technology exports surged 160.4 percent, led by a 196.9 percent jump in semiconductors and a 282.7 percent increase in computer peripherals, including solid-state drives. Non-IT exports also rose 18.6 percent, supported by petroleum products, chemicals, steel and passenger cars. The services account recorded a $1.29 billion deficit, slightly wider than the $1.09 billion shortfall in May. The travel account posted a $440 million surplus, up from $50 million a month earlier, as inbound tourism strengthened while higher fuel surcharges curbed overseas travel by Koreans. The balance on the use of intellectual property swung to a $440 million deficit from a $70 million surplus in May after unusually large royalty settlements in the previous month boosted receipts. The primary income account surplus widened to $3.27 billion from $2.17 billion, supported by higher dividend income from overseas investments and seasonally lower dividend payments to foreign investors. August 6, 2026 08:0 -
U.S.-Japan Currency Cooperation Affects Treasury Yields Following a rare joint intervention by U.S. and Japanese foreign authorities in the market, U.S. long-term Treasury yields temporarily fell. However, forecasts suggest that structural upward pressures from growth, inflation, and fiscal policies will be difficult to suppress. Concerns have been raised that the global trend of rising long-term interest rates could also impact domestic government bond yields, leading to increased pressure on loan rates.According to Investing.com, the yield on 10-year U.S. Treasuries closed at 4.684% on August 4, down 6.1 basis points (1 basis point = 0.01 percentage points). This marked a second consecutive day of decline, following a drop of 4.26 basis points on August 2. This trend is attributed to the joint intervention by the U.S. and Japan, which took place from July 30 to August 1, during which they sold dollars and bought yen.While U.S. Treasury yields stabilized somewhat after the intervention, the upward trend has not been reversed. On August 4, the yield on 10-year Treasuries began to rise again. From the beginning of the year until the end of July, the yield had increased by 56.8 basis points. The yield on 30-year mortgages, which serve as a benchmark for U.S. home loans, also rose to 5.28% on July 31, the highest level in 19 years since July 2007.The Wall Street Journal reported that the yens value, which has fallen to its lowest level in 40 years, poses a risk of pushing U.S. Treasury yields higher. Additionally, it noted that the U.S. is likely to support the yen to fulfill Japans $550 billion investment commitment to the U.S.Japan is one of the largest holders of U.S. Treasuries. If the yen continues to depreciate excessively, Japanese authorities may sell U.S. Treasuries to defend the yen, which would lead to falling bond prices and rising yields. In fact, during Japans interventions to defend the yen in April, May, and July 2024, its holdings of U.S. Treasuries decreased by a total of $59 billion. In April and May of this year, they also fell by $48.4 billion.Long-term Treasury yields reflect market expectations regarding growth, inflation, and fiscal policy. The ongoing conflict in the Middle East has caused a surge in international oil prices, raising concerns about prolonged inflation in the U.S. Increased fiscal spending and the burden of issuing government bonds are also contributing factors to rising long-term yields. Although U.S. Treasury yields regained some stability after the U.S.-Japan intervention, they have begun to rise again for these reasons.The domestic bond market is not immune to global long-term interest rate movements. Recently, domestic government bond yields have been rising, particularly for long-term bonds. The upward trend in long-term yields in major countries like the U.S. and Japan, along with expectations of sustained high domestic inflation, is increasing pressure on long-term interest rates.If long-term interest rates rise in an environment where inflation remains unstable, borrowers may face increased cost burdens. Rising long-term bond yields can exert upward pressure on loan rates through market rates such as bank bonds. Given the already high levels of household debt, this could pose challenges for consumption and investment.With forecasts suggesting that U.S. long-term Treasury yields will be difficult to lower, domestic government bond yields are also likely to face upward pressure. Choi Je-min, a researcher at Hyundai Motor Securities, stated, The U.S. Treasury and the central bank may attempt to suppress coupon bond increases, but this may only provide short-term relief from rapid rate hikes. It will be challenging for long-term rates to normalize quickly.Kim Sung-soo, a researcher at Hanwha Investment & Securities, noted, Long-term bond yields cannot ignore the impact of robust growth, expansionary fiscal policy, and the global trend of rising long-term interest rates. The direction of long-term rates will be determined by the contents of the 2027 budget proposal.* This article has been translated by AI. August 5, 2026 08:1
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Korea's FX reserves up marginally July on bond issuance and softer USD SEOUL, August 05 (AJP)- South Korea's foreign exchange reserves rose only marginally in July despite a record euro-denominated sovereign bond sale and favorable currency valuation effects, as foreign exchange operations and swaps with the National Pension Service offset much of the inflow, central bank data showed Wednesday. The country's reserves stood at $427.95 billion at the end of July, up $590 million from $427.36 billion a month earlier, according to the Bank of Korea. The modest increase came as gains from a weaker U.S. dollar, investment returns on reserve assets and proceeds from the government's foreign exchange stabilization bond issuance were largely offset by foreign exchange swaps with the National Pension Service and other market operations. The BOK did not disclose how much each factor contributed to the monthly change, consistent with its practice of withholding detailed breakdowns of reserve movements related to currency market intervention and swap transactions. The U.S. dollar lost more than 8 percent against the Korean won in July from a prior month, steeper than 1.31 percent fall in the dollar index. South Korea's finance ministry raised 1.7 billion euros ($1.94 billion) through dual-tranche foreign exchange stabilization bonds on July 8, marking the country's largest-ever euro-denominated issuance. The sale consisted of 700 million euros of three-year notes and 1 billion euros of seven-year notes. The bonds were priced at 10 basis points and 28 basis points above the euro mid-swap rate, respectively, representing the lowest spreads ever achieved for Korean euro-denominated stabilization bonds. The ministry confirmed strong investor demand, secured despite heightened geopolitical uncertainty in the Middle East, reflected confidence in South Korea's economic fundamentals and was expected to lower overseas funding costs for Korean borrowers by establishing a tighter benchmark spread. The issuance completed the government's planned $5 billion equivalent foreign-currency bond program for this year. South Korea's reserves nevertheless remained $100 million below the $428.05 billion recorded at the end of 2025, leaving the country's external liquidity buffer broadly unchanged over the first seven months of the year. Securities, which account for the largest share of the reserves, fell $340 million from June to $380.01 billion, representing 88.8 percent of the total. Deposits increased $860 million to $23.13 billion, accounting for 5.4 percent of the reserves. Special Drawing Rights allocated by the International Monetary Fund rose $60 million to $15.70 billion, while South Korea's reserve position at the IMF increased $10 million to $4.32 billion. Gold holdings were unchanged at $4.79 billion, accounting for 1.1 percent of total reserves. South Korea was the world's 10th-largest holder of foreign exchange reserves at the end of June, the latest month available for international comparison. China remained the largest holder with $3.416 trillion, followed by Japan ($1.288 trillion) and Switzerland ($1.088 trillion). Russia, India, Taiwan, Germany, Saudi Arabia and Hong Kong ranked fourth through ninth, while Singapore placed 11th with $426.2 billion, slightly below South Korea's end-June total. August 5, 2026 07:3 -
Offshore NDF trading behind a third of won's March decline: BOK SEOUL, August 04 (AJP) - Offshore non-deliverable forward trading accounted for an estimated one-third of the won’s depreciation in March, highlighting the influence overseas positions over Korea’s domestic FX market. The impact was about four times greater overnight than during Seoul trading hours, when deeper liquidity and a broader range of transactions diluted the effect of NDF flows. The Bank of Korea on Tuesday released estimates of the impact of NDF trading on the dollar-won exchange rate, based on a vector autoregression model that accounted for factors including interest-rate differentials and broad movements in the US dollar. Since the beginning of 2024, foreign investors’ net NDF purchases were estimated to have lifted the dollar-won rate by an average of about 2 won a month, with every $100 million in net purchases adding roughly 0.1 won. In March, the transactions added an estimated 26 won to the dollar-won rate, equivalent to 33 per cent of the currency pair’s 79-won monthly increase. In May, they contributed about 7 won, or 26 per cent of that month’s 27-won rise. Foreign investors’ net NDF purchases reached $53.9 billion in the first half of the year, the largest amount recorded for any six-month period. NDFs allow investors to agree on a future exchange rate without exchanging the underlying currencies, with only the difference between the contracted and settlement rates paid in dollars at maturity. Although the contracts are settled offshore, they can affect the domestic spot market when financial institutions hedge their exposure, with large NDF purchases by investors betting on a weaker won generating additional dollar demand and placing upward pressure on the exchange rate. Governor Shin Hyun-song had previously identified the same transmission mechanism as a factor behind the won’s weakness, describing it at his April confirmation hearing as a case in which “the tail wags the dog” and explaining at a May press conference that offshore positions could spill into the domestic market through financial institutions’ hedging. Across the 10 months with the largest NDF net purchases since 2024, the trades added an average of about 12 won to the exchange rate overnight, compared with roughly 3 won during daytime trading. Global developments were typically priced first through offshore NDFs while the Seoul market was closed, with thinner volumes and lower liquidity magnifying their impact, while deeper daytime liquidity and simultaneous activity in spot and other foreign-exchange markets reduced their influence. The BOK said Korea’s shift to round-the-clock foreign-exchange trading on July 6 could draw won transactions away from the offshore NDF market by allowing global developments to be reflected in onshore dollar-won trading in real time. The central bank cautioned that NDFs were only one of several forces driving the exchange rate, alongside the global dollar, interest-rate differentials, cross-border capital flows and market sentiment. A gradual shift towards onshore spot and deliverable forward transactions could deepen the market, improve transparency and reduce the extent to which concentrated offshore positions amplify short-term movements in the won, the BOK said. August 4, 2026 16:1 -
Odds of Korea's back-to-back rate hike fall on softer headline inflation SEOUL, Aug. 4 (AJP) — The surprising stall in South Korea's inflationary run in July has lowered expectations for a back-to-back interest-rate increase by the Bank of Korea this month, although policymakers remain wary of persistent underlying price pressures. Consumer prices rose 2.8 percent from a year earlier in July, slowing from 3.2 percent in June and falling below the 3 percent mark for the first time in three months. Core inflation, which Bank of Korea Gov. Shin Hyun-song has repeatedly highlighted as a better gauge of underlying price pressures because it excludes volatile food and energy prices, crept up to 2.6 percent from 2.5 percent - highest level since December 2023 -, albeit at a measured pace. The Bank of Korea estimated that lower petroleum prices and agricultural, livestock and fisheries goods reduced annual headline inflation by 0.33 percentage point and 0.17 percentage point, respectively. By contrast, core goods and services together added 0.11 percentage point, underscoring that domestic price pressures have yet to fully dissipate. Lee Ji-ho, a BOK deputy governor, said the central bank would "monitor inflation with vigilance," warning that the pass-through of earlier cost increases and strengthening demand-side pressures could keep core inflation elevated. The mixed inflation signals give the Bank of Korea greater flexibility over the timing of its next move rather than making another rate increase inevitable. Financial markets modestly pared expectations for a second consecutive rate increase at the Aug. 27 policy meeting, although market pricing continued to suggest investors still see a meaningful chance of another hike. At around 1:50 p.m., the won traded near 1,431.9 per dollar, about 2.9 won weaker than the previous close. The three-year Korean government bond yield fell 1.1 basis points to 3.731 percent by midday, while the benchmark 10-year yield edged down just 0.1 basis point to 4.252 percent. The sharper decline in the policy-sensitive three-year yield suggested investors had scaled back expectations for an August increase, while the muted moves in the currency and longer-term bonds indicated markets had yet to fully price in a pause. The Bank of Korea raised its benchmark interest rate by 25 basis points to 2.75 percent on July 16, citing stronger export- and investment-led growth, inflation expected to remain above target and persistent financial stability risks. While signaling that further policy tightening would likely be needed, the central bank stressed that the timing and pace of additional increases would depend on incoming data on inflation, economic growth and financial stability, leaving an Aug. 27 move far from certain. The central bank also expects headline inflation to reaccelerate to around 3 percent in August because of a base effect stemming from steep mobile-service discounts offered by telecom operators a year earlier. The government estimates that the statistical effect alone could add about 0.8 percentage point to the annual inflation rate. Ahn Jae-kyun, an economist at Korea Investment & Securities, said markets had lowered the probability of an August rate increase following the inflation data but were still assigning odds of more than 50 percent, while maintaining a rate hike as his base-case scenario. The equity-market correction entering the second half has strengthened the argument for a cautious policy approach, as falling stock prices could curb household spending through a negative wealth effect and ease demand-driven inflationary pressure. NH Investment & Securities projected private consumption growth could slow by about 0.15 percentage point if the stock market turns bearish in the latter half. Barclays estimated that households have suffered roughly 600 trillion won in valuation losses from the recent market sell-off. Pressure on household budgets remains intact. The living necessities index rose 2.5 percent from a year earlier in July, while its non-food component climbed 3.2 percent, indicating that consumers continue to face elevated costs for everyday purchases even as headline inflation moderates. Housing remains the clearest obstacle to an extended pause. Seoul apartment prices rose 0.25 percent in the fourth week of July, extending their gains to a 77th consecutive week despite easing slightly from the previous week's 0.27 percent increase, keeping financial stability concerns firmly on the Bank of Korea's radar. The latest data strengthen the case for a hawkish hold rather than an outright pause in August. The BOK will likely to decide to resume tightening on economic and stock performance in the second half amid mixed views on the strength and duration of the chip-led growth. August 4, 2026 15:1