By Cynthia Kim and Jihoon Lee
SEOUL (Reuters) – South Korea’s central financial institution stored rates of interest unchanged for a thirteenth straight assembly on Thursday, as policymakers prioritised the necessity to maintain cussed inflation in verify even because the case for charge cuts later this yr grows.
The Financial institution of Korea held its benchmark rate of interest at 3.50% at its financial coverage assessment, as anticipated by 38 out of 40 economists surveyed by Reuters.
The BOK additionally downgraded forecasts for each development and inflation this yr.
It reduce 2024 development forecast to 2.4% from 2.5% beforehand, after Asia’s fourth-largest financial system unexpectedly contracted within the second quarter. It now sees shopper inflation at 2.5% for this yr, slower than 2.6% seen beforehand.
Economists count on the BOK to start out chopping rates of interest on the financial institution’s subsequent coverage assembly on Oct. 11, across the identical time the U.S. Federal Reserve is predicted to ship its first charge reduce in 4 years.
The prospects on an October reduce come because the BOK’s international friends unwind the aggressive coverage tightening of latest years with central banks in Canada, New Zealand and the euro zone having all loosened financial settings.
Rising condominium costs in Seoul took centre stage in coverage talks with the federal government earlier this month asserting plans to extend housing provide to chill surging costs.
That is one cause analysts assume the BOK could go sluggish on charge cuts.
Inflation has typically cooled sufficient to assuage issues over worth stress however a resurgence in family debt on the again of expectations for rate of interest cuts has raised issues about easing too quickly.
“Considering that household debt is increasing fast, we expect there to be only one rate cut this year. We think the BOK will remain relatively hawkish,” stated Kim Jun-yeong, an analyst at DS Funding & Securities, who sees a reduce within the fourth quarter.
The main focus is on Governor Rhee Chang-yong’s press convention at 0210 GMT, the place the names of any dissenters could possibly be introduced. Dissenting votes usually result in coverage modifications in subsequent months.