[Financial News] The Bank of Korea’s unanimous decision to hold its base rate at the Monetary Policy Board’s October meeting has been followed by forecasts that a further rate hike is likely in November. This is because economic growth this year and next is expected to exceed previous forecasts, while upward pressure on core inflation is also expected to persist. Global financial firm State Street expects the Bank of Korea to raise its base rate from the current 3.00% to 3.25% in November and keep it there through the end of 2027. Choi Ji-wook, managing director of macro strategy for Asia-Pacific at State Street Markets, said on the 22nd, regarding the Bank of Korea’s base-rate decision, “Given the increased likelihood that the Bank of Korea will revise up its growth and inflation forecasts, I maintain my existing view that it will raise rates again at the Monetary Policy Board meeting in November.” The Bank of Korea held its base rate at 3.00% that day. The decision is seen as intended to assess the effects of consecutive rate hikes in July and August on inflation, growth and financial stability. State Street said that, despite the unanimous decision to hold the base rate, the monetary policy statement was somewhat more hawkish than markets had expected. That is because the Bank of Korea expects economic growth this year and next to substantially exceed its August forecasts of 3.3% and 2.9%, respectively, and judges that the 2027 rates of consumer price and core inflation will also surpass their previous forecasts of 2.3% and 2.5%. State Street expects the Bank of Korea to raise its forecasts for 2027 consumer price and core inflation by about 0.1 percentage point each in its November economic outlook. The future path of core inflation was singled out as a key factor in determining whether there will be another rate hike. State Street forecasts consumer price inflation of 2.8–2.9% and core inflation of 2.7% in October. “I believe the current path of core inflation is the most important factor in the Bank of Korea’s monetary policy decisions,” Choi said, adding, “Given the possibility that next year’s core inflation forecast will be revised upward, I believe a rate hike in November is likely.” State Street also said that the Bank of Korea has strong confidence in an economic recovery driven by increased investment in artificial intelligence (AI). It said the Bank believes the AI investment cycle and improving income conditions will continue to support growth despite the recent stock market correction. Based on the Bank of Korea’s assessment of economic conditions, State Street estimated that GDP growth in the third quarter, due to be announced next week, could come in in the high 0% range quarter on quarter. State Street assessed Bank of Korea Governor Hyun Song Shin’s press conference as delivering a neutral message that combined hawkish and dovish elements. It interpreted the governor’s emphasis on proactive monetary policy as conveying that the unanimous hold this time did not rule out a rate hike at the next Monetary Policy Board meeting. State Street expects that, if a rate hike is implemented in November, the base rate will remain at around 3.25% through the end of 2027. It also left open the possibility of another hike in the first half of 2027, depending on international oil prices and demand-side inflationary pressures. However, State Street kept its terminal base-rate forecast at 3.25%, given that high market interest rates and sluggish real wage growth could weigh on private consumption and construction investment next year. “The possibility of another rate hike in the first half of 2027 also remains open, depending on oil price trends and whether demand-side inflationary pressures rise,” Choi said. “At the same time, given high market interest rates and sluggish real wage growth, we remain somewhat negative about private consumption and construction investment next year.” [email protected] Kim Hyun-jung Reporter