Base Rate Expected to Remain Unchanged for Fourth Consecutive Time... “Concerns Over Housing Prices, Household Debt, and Exchange Rate”

[Financial News] Economic experts predict that the Monetary Policy Board meeting of the Bank of Korea (BOK) scheduled for the 27th is highly likely to keep the current base rate at 2.50%. This would mark the fourth consecutive decision to hold the rate steady, following freezes in July, August, and October.
According to the BOK on the 24th, the Monetary Policy Board will make a final decision on the base rate at this meeting. Experts believe that, given the rise in housing prices in the Greater Seoul area, the increase in household loans, and fluctuations in the exchange rate, maintaining the current rate is more appropriate than a rate cut.
Park Jung-woo, an economist at Nomura Securities, stated, “With apartment prices in Seoul remaining strong and the Korean won continuing to weaken, it is preferable for the BOK to hold the rate rather than lower it.” Ahn Ye-ha, a senior researcher at KIWOOM Securities, also explained, “A rate cut could put upward pressure on household debt and housing prices in the Greater Seoul area, while the high exchange rate remains a burden for financial stability.”
Last month, the Federal Reserve System (Fed) lowered its base rate by 0.25 percentage points to 3.75–4.00%, narrowing the Korea-U.S. rate gap to 1.50 percentage points. However, if the BOK implements another rate cut, the gap would widen again to 1.75 percentage points. Joo Won, head of economic research at Hyundai Research Institute (HRI), analyzed, “A reversal in the Korea-U.S. rate differential is not a normal situation, and it will be difficult for the BOK to lower rates alone while the Fed maintains a hawkish stance.”
While there is consensus among experts that the base rate will remain unchanged, opinions are divided on when and by how much rate cuts might resume. Joo noted, “Looking at past cases, there is a tendency for the base rate to remain steady for about a year and a half after the end of a rate-cutting cycle before increases resume.”
On the other hand, some experts anticipate one or two additional rate cuts next year. Cho Young-moo, head of the NH Financial Research Institute, projected, “If concerns over the economy grow after the BOK governor is replaced in April next year, there is a possibility of one or two rate cuts in the second half of the year.”
imne@fnnews.com Hong Ye-ji Reporter