BOK expected to hold rate, tightening cycle still in place, economists say

Markets have fully priced in a hold, so the statement’s tone and any clues on the next move will drive the reaction. A hawkish pause that keeps another rate increase clearly on the table would likely boost the won and lift short-term Korean government bond yields. Any sign the cycle may be winding down could pressure the currency. For stock markets, a pause provides some relief for sectors sensitive to interest rates. The export boom driven by semiconductors keeps chipmakers at the core of the growth narrative. A record current account surplus gives underlying support to the won, even as policy expectations drive short-term moves.

The Bank of Korea is expected to take a breather today rather than end its tightening cycle, with strong chip exports and persistent price pressures keeping a further rate increase on the horizon.

Summary of expectations:

• All six economists polled by Yonhap forecast the Bank of Korea will hold its benchmark rate unchanged at the meeting today
• The Bank of Korea’s base rate is currently 3.00%
• The central bank raised rates in July and August; a third straight hike would be unusual
• Economists expect the bank to keep a tightening bias, pausing to slow the pace and assess the timing of further increases
• Strong chip exports are driving growth, while inflation faces pressure from both supply and demand sides
• The tightening cycle may persist in the near term, according to the survey
• South Korea’s current account surplus for January to August was about $279 billion, nearly four times the roughly $70 billion from the same period a year earlier
• Announcement due at  GMT / 2100 US Eastern time

-

The Bank of Korea is set to leave interest rates unchanged at its policy meeting today, pausing after two consecutive hikes, although economists say the tightening cycle is not finished.

All six economists surveyed by Yonhap News Agency expect the central bank to hold its benchmark rate, currently at 3.00% after increases in July and August. Respondents said the Bank of Korea is likely to maintain a tight policy stance. Yet they view a pause as more probable than a rare third consecutive hike, giving policymakers room to adjust the tightening pace and determine when further increases may be needed.

The economists cited conditions that still warrant tighter policy. Strong semiconductor exports are fueling growth, while inflation faces upward pressure from both supply and demand sides. Together, these factors suggest the hiking cycle could continue in the near term, the survey found.

The strength of the export sector shows up in South Korea’s external balances. The cumulative current account surplus for January to August reached about $279 billion, nearly four times the roughly $70 billion recorded in the same period last year. The surplus underscores how much the economy benefits from global demand for memory chips and other semiconductors, a key growth driver that has allowed the central bank to tighten without derailing the expansion.

A hold would represent a shift in pace rather than direction. Markets will focus closely on the central bank’s statement and any guidance on the timing of the next move, looking for signs on whether policymakers see another hike as likely in the coming months. The balance between export-driven growth and persistent price pressures will be central to that assessment, alongside the outlook for the won and domestic demand.