South Korea's central bank widely expected to freeze rate at Thursday's meeting: Survey

SEOUL, November 25 (AJP) - The Bank of Korea is widely expected to keep its benchmark interest rate unchanged at 2.50 percent at its final policy meeting of the year, slated for Thursday, as it prepares to lift growth projections for both 2024 and 2025.

The anticipated hold comes amid firmer economic activity and persistent concerns over a weak won, rising home prices and elevated household debt — factors that analysts say have effectively ended the rate-cut cycle that began last year.

A survey by Aju Business Daily of 10 bond and macroeconomic analysts showed unanimous expectations for another rate hold at the Nov. 27 meeting, marking the fourth straight pause. Nine of the experts expect one dissenting vote in favor of a cut, while one respondent anticipates full consensus.

Currency and property market pressures remain central to the bank’s cautious stance. The won has hovered over 1,470 per dollar recently.

“With the exchange rate at 1,470 won, cutting rates is burdensome,” said Park Sang-hyun, an analyst at iM Securities. “Real estate prices in Seoul remain unstable, making a hold inevitable.”

Cho Yong-gu of Shin Young Securities said stronger economic indicators and ongoing government efforts to stabilize housing and currency markets reduce the likelihood of a cut. “Economic forecasts are being revised upward. A rate cut seems unlikely,” he said.

Markets are now watching for signals on whether the easing cycle has formally ended. Analysts say the key indicators will be the size of the revisions to next year’s growth outlook and the bank’s forward guidance through early 2026. A forecast that exceeds Korea’s potential growth rate — estimated at about 1.8 percent — would strengthen the case that no further cuts are coming.

“If the growth forecast is raised to around 2 percent, expectations for a rate cut next year will diminish significantly,” said Ahn Ye-ha of Kiwoom Securities.

Eighty-eight percent of surveyed experts expect the central bank to raise this year’s growth outlook from 0.9 percent to over 1 percent, and next year’s from 1.6 percent to 1.8–1.9 percent. Park of iM Securities said a revision is “highly likely,” citing the base effect and a recovery in the semiconductor sector.

BOK Governor Lee Chang-yong has also hinted at a possible upgrade in the bank’s growth projections, reinforcing expectations that the easing phase is over. Four of analysts surveyed said the May rate cut marked the end of the cycle, with the central bank now entering a prolonged hold.

Kang Seung-won of NH Investment & Securities expects the policy rate to eventually settle at 2.25 percent after the first half of next year, while noting that the exchange rate and updated growth forecasts remain crucial. Meritz Securities’ Yoon Yeo-sam predicted the 2.50 percent rate would likely stay in place through 2026. “We’ll see improved economic and inflation forecasts in this meeting,” he said.

* This article, published by Aju Business Daily, was translated by AI and edited by AJP.