U.S. firms anticipate BOK rate hike in August

U.S. financial services firms Morgan Stanley and JP Morgan said Friday that they expect the Korean central bank to raise the base rate next month on a modest economic recovery and low inflationary pressure.

In a monetary policy committee meeting on Thursday, the Bank of Korea (BOK) held the benchmark policy rate unchanged at 1.5 percent, citing signs of an economic slowdown and uncertainties over global trade disputes.

The BOK has maintained the accommodative stance for eight months since the 0.25 percentage point hike in November last year.

“We see a shallow rate hike cycle and only expect one more rate hike in the third quarter of 2018 for 2018-19,” Morgan Stanley said in its latest report. “With growth expected to (be) moderate and no significant inflation pressures, we think any further delay in BOK tightening would reduce the likelihood of it actually happening.”

The third quarter meeting is due in August, with two more gatherings slated for October and November.

JP Morgan said the BOK will take action in the next monetary policy meeting.

“(In the July meeting) there was a hawkish signal with a new dissent vote for a hike,” the U.S.-based company said. “We think the median view of the monetary policy committee has tilted further to a hawkish stance. Thus we continue to expect that the BOK would hike 25 basis points in August’s meeting.”

It noted that the upcoming second-quarter economic data on gross domestic product growth, consumer prices and exports will be critical for the August voting.

However, in a press briefing after the rate-freeze meeting, BOK Gov. Lee Ju-yeol said that the non-unanimous decision is not an official signal for future rate hikes.’

Yonhap