Investing.com — The Bank of Korea’s decision to keep interest rates unchanged this week was accompanied by a more hawkish policy stance, increasing the likelihood of rate hikes beginning as soon as July, according to a note from ING.
The Bank of Korea left its benchmark policy rate unchanged at 2.5%, as expected, although two board members dissented and called for a 25-basis-point increase.
ING said Governor Shin Hyun-song acknowledged that a rate hike could have been justified at the meeting, but policymakers opted to wait for more clarity on inflation and developments in the Middle East.
The research firm said the central bank’s latest guidance points to a higher probability of two rate hikes in the second half of 2026. ING’s base case remains a total of 75 basis points of tightening, with moves expected in July, October, and the first half of 2027.
The outlook follows upward revisions to the Bank of Korea’s economic forecasts. The central bank now expects GDP growth of 2.6% in 2026 and 2.1% in 2027, up from previous projections of 2.0% and 1.8%, respectively. Inflation forecasts were also raised to 2.7% for 2026 and 2.3% for 2027.
According to the note, policymakers expect the economy to grow above its potential rate over the next two years, increasing the risk of sustained inflation pressures. Governor Shin also indicated that the output gap is likely to turn positive next year.
Link: https://ca.finance.yahoo.com/news/bank-korea-getting-ready-multi-103409347.html