SEOUL, August 25 (AJP) - Nearly eight in 10 bond-market professionals expect the Bank of Korea (BOK) to hold its policy rate Thursday, marking a sharp shift from the last poll ahead of the July rate-setting meeting, a survey showed Tuesday.
The Korea Financial Investment Association (KOFIA) said 79 percent of 100 bond-market professionals it surveyed expected the BOK to keep its base Rate at 2.75 percent. Twenty percent forecast another increase.
KOFIA said stronger economic growth, persistent inflation pressure and rising household debt continued to support the case for another rate hike. A firmer won and higher market interest rates, however, strengthened expectations for a pause.
The latest results mark a reversal from the run-up to the BOK's July meeting, when 66 percent of respondents expected a rate increase and 34 percent forecast a hold.
The BOK last month bumped up the benchmark rate 25 basis points to 2.75 percent in its first increase since January 2023.
A separate survey by AJP and Aju Business Daily showed economists were considerably more divided over Thursday's decision.
Five of nine economists forecast a hold, while four expected another 25-basis-point increase.
The shift in bond-market expectations comes as the BOK weighs stronger economic growth and financial-stability risks against easing inflation pressure and a firmer won.
South Korea's economy expanded 0.6 percent from the previous quarter in the second quarter.
Consumer inflation slowed to 2.8 percent in July from 3.2 percent in June, reducing some of the urgency for another immediate rate increase.
KOFIA's Base Rate Bond Market Survey Index (BMSI) jumped 47 points from the previous month to 81.0, reflecting the sharp increase in expectations for unchanged policy.
The broader composite BMSI for September rose to 89.5 from 86.2, though it remained below the neutral level of 100.
The interest-rate outlook BMSI climbed 15 points to 99.0.
Sixty-nine percent of respondents expected market interest rates to remain broadly unchanged, up 13 percentage points from the previous month. The share expecting rates to rise fell 14 percentage points to 16 percent.
The BOK will announce its rate decision Thursday alongside updated forecasts for economic growth and inflation.
AJP Takeaways
• Nearly 80 percent of bond-market professionals expect the BOK to hold its Base Rate at 2.75 percent Thursday, according to a KOFIA survey.
• Bond-market expectations have reversed sharply since July, when two-thirds of respondents anticipated the rate increase that the BOK ultimately delivered.
• The BOK must balance stronger growth and household-debt risks against easing inflation, a firmer won and higher market interest rates.
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