DBS economists Radhika Rao and Mo Ji expect the Bank of Korea (BoK) to raise its base rate to 2.75% from 2.50% in July, citing continued CPI inflation above 3% and stable growth. They highlight powerful exports and investments linked to the AI boom and note that the weakness of the Korean won and portfolio outflow further justify tightening monetary policy.
Korea’s policy tightening supported by data
“The Bank of Korea is expected to raise the base rate to 2.75% from 2.50% in July.”
“The BoK signaled in June that it remains ready to tighten monetary policy despite the recent decline in oil prices following the easing of tensions in the Middle East.”
“CPI inflation remained above 3% year-on-year for two consecutive months through June and is expected to remain at this level for the remainder of the year, supported by persistent cost pass-through, elevated inflation expectations and second-round effects.”
“In terms of economic growth, the economy continues to perform well, driven mainly by solid exports and investment amid the AI boom.”
“Meanwhile, the continued weakness of the KRW against the background of portfolio capital outflows is an additional reason to increase rates.”
(This article was created with the facilitate of an artificial intelligence tool and has been reviewed by an editor. Find out more.)
