Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Bank of Korea Considers Timing of Next Hike After Standing Pat

EconomyOct 12, 2021 05:24
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

(Bloomberg) -- South Korea’s central bank held off from a second-straight rate hike on Tuesday, but signaled further moves are likely in the pipeline as it took note of rapidly rising home prices, inflation pressures and recovery momentum.

In a statement after holding the key rate at 0.75% on Tuesday, the central bank said it will “appropriately adjust” the degree of policy accommodation as sound growth and above-target inflation continue despite virus-related uncertainties. 

The decision was predicted by all but one of 22 analysts surveyed by Bloomberg, with many expecting an increase at the next meeting in November. 

Tuesday’s outcome shows the BOK is still on track to raise rates further but isn’t willing to rush its policy tightening as Covid outbreaks and an unstable global recovery raise the stakes of any policy missteps. The BOK has also said it will monitor shifts by the Federal Reserve when plotting its own moves. 

“The BOK has entered a hike cycle because it’s now more concerned about debt and financial health than the economic recovery and that stance isn’t going to change any time soon,” said An Young-jin, an economist at SK Securities. “A hike later this year and another one early next year before the governor steps down is the likely scenario going forward.”

With Governor Lee Ju-yeol and other Korean policy makers determined to rein in financial imbalances, swap markets show bets for two quarter-percentage-point hikes within six months. 

The BOK said growth this year will be around 4%, same as its earlier forecast. The bank expects inflation to run above August’s 2.1% projection for some time before cooling. 

Data released after August’s rate hike support arguments in favor of further tightening. Home prices have continued to surge and inflation has stayed above the 2% target. The economic backdrop remains favorable, with export growth in double digits, low unemployment and a pickup in consumer confidence, though a slowdown in China’s recovery points to growing headwinds. 

The housing market rally has been a particular concern for policy makers as it’s built on leverage and is at risk of a sharp correction should shocks emerge, while also exacerbating economic disparities. The BOK sees debt bubbles as a threat to long-term economic growth. 

What Bloomberg Ecconomics Says..

“It’s a matter of time -- probably about six weeks -- before the Bank of Korea follows up on its August rate liftoff with another hike.”

-- Justin Jimenez, Asia Economist

For the full report, click here. 

Korea’s government bonds gained on Tuesday as fixed-income investors took relief from the stand-pat decision. The three-year yield declined two basis points to 1.68% as of 10:48 a.m. in Seoul, but remained notably higher than a month earlier. 

The won weakened further to briefly breach 1,200 per dollar, a level seen as a psychological threshold by investors and the authorities. 

Of keen interest during Lee’s press conference will be whether any member dissented and called for an immediate hike. New member Park Ki Young has yet to make his policy preferences clear, though economists expect him to have a hawkish stance based on his previous remarks. 

Dissenting votes calling for an immediate hike would bolster bets for an increase at the upcoming Nov. 25 decision.

(Updates with monetary policy statement.)

©2021 Bloomberg L.P.

Bank of Korea Considers Timing of Next Hike After Standing Pat
 

Related Articles

Bitcoin tumbles 9.95% to $48,397.56
Bitcoin tumbles 9.95% to $48,397.56 By Reuters - Dec 04, 2021

(Reuters) - Bitcoin dropped 9.95% to $48,397.56 at 18:02 GMT on Saturday, losing $5,346.13 from its previous close. Bitcoin, the world's biggest and best-known cryptocurrency, is...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email