Bank of Korea's Rate Cut Forecast: First Cut Expected in October and Rate Changes in 2024

Recently, discussions have intensified among South Korean economic experts regarding the timing of the Bank of Korea's interest rate cuts

Recently, discussions have intensified among South Korean economic experts regarding the timing of the Bank of Korea's interest rate cuts. According to a survey conducted by the Hankyung Economist Club, the majority of experts expect the first rate cut to occur in October, with the base rate potentially dropping into the 2% range by the first half of next year. In this blog post, we will analyze the background of these rate cut forecasts and their implications.

The Bank of Korea's interest rate policy has a significant impact on the overall economy. In a recent survey conducted by the Hankyung Economist Club, economic experts indicated that the Bank of Korea is likely to implement its first interest rate cut in October. Out of the 20 experts surveyed, 15 predicted a rate cut in October, while two anticipated it in November, and one expected it to occur later in the fourth quarter.

An interesting point in this survey is the decrease in the number of experts predicting a rate cut in August. In a previous survey conducted last month, five experts supported an August rate cut, but this has now dropped to just two. The majority of experts now view the rate cut as likely to happen after October, considering concerns about the domestic economy and the U.S. monetary policy.

Experts have highlighted concerns over sluggish domestic demand as a key factor driving the need for a rate cut. Fifty percent of respondents cited weak domestic demand as the most significant reason for a potential rate cut, followed by concerns over rising real estate prices and household debt. Additionally, with price stability reportedly achieved to some extent, there is a growing consensus that a shift in monetary policy towards boosting domestic demand is necessary.

However, the potential downsides of a rate cut cannot be overlooked. Some experts have voiced concerns about rising real estate prices and increasing household debt, emphasizing the need for a cautious approach. The stability of foreign exchange markets and the U.S. economic situation were also identified as crucial factors to consider.

The Bank of Korea's interest rate policy is a key determinant of the future direction of the South Korean economy. According to the survey, experts expect the first rate cut to occur in October, with the base rate potentially falling into the 2% range by the first half of next year. However, the broader economic impacts of such a rate cut must be carefully weighed, with a balanced approach needed to stimulate domestic demand while managing household debt. It will be important to closely monitor how the Bank of Korea's interest rate policy unfolds in the coming months.