Bank of Korea holds rates despite still high inflation: Reuters Poll

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by Anant Chandak

BENGALURU (Reuters) – The Bank of Korea will maintain its base fee at 3.50% on Thursday and for the rest of this yr, ending its longest tightening cycle despite still-high inflation, Reuters ballot economists revealed. Have completed

After elevating curiosity rates by 300 foundation factors from August 2021, the BoK faces a shrinking financial system – a 0.4% decline final quarter was the primary in 2/1-2 years – in addition to falling exports and better home debt with.

On the similar time, CPI inflation eased to five.20% in January, greater than double the central financial institution’s goal of 2.00% and can take one other yr to get again there, in response to a separate Reuters ballot.

All 42 economists polled February 13-20 forecast no change within the central financial institution’s 3.50% base fee at its February 23 assembly, the best since 2008.

Some respondents anticipated rates to rise above 3.50% someday this yr, whereas practically half anticipated at the least one fee lower by the tip of the yr.

Practically 90% of economists who’ve issued forecasts throughout the first quarter of subsequent yr, 26 out of 29, anticipate curiosity rates to fall under 3.50%, with the bulk forecasting 3.00% or extra, up from 3.25 prior to now. Survey than % or extra.

“Home demand faces headwinds from high debt service burden and a flagging actual property market; “Consumer sentiment has also eased and households are downsizing,” wrote ANZ economist Crystal Tan.

“General, we imagine the BOK will go on an prolonged fee break. We anticipate the primary fee lower in 2024, assuming inflation is across the 2% mark and the US (Federal Reserve) turns round.

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The BOK’s stance differs from that of many different world central banks, that are anticipated to proceed elevating rates, together with the Fed. That would put strain on the Korean received, which has fallen about 3% in opposition to the greenback this yr.

A lot will depend upon how sharply inflation falls within the yr forward. It has fallen from a peak of 6.3% in July final yr.

“At the end of the year, we expect inflation to move towards the BoK’s medium-term target,” stated Derrick Kam, Asia economist at Morgan, which might immediate the BoK to start out chopping rates to maneuver coverage into extra impartial territory. Will get scope.” Stanley stated.

“In our view, the risk remains if inflation proves more stable than we expected, or if there is a significant hawkish reassessment of the US Federal Reserve’s monetary policy stance.”

(Reporting and polling by Anant Chandak; Modifying by Hari Kishan, Ross Finlay and Barbara Lewis)


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