South Korea Interest Rate

The Bank of Korea (BoK) maintained its base rate at 3.5% for the 12th straight time during the July 2024 meeting, as widely expected. Thursday's move came as the board needed more time to assess a slowdown in inflation and pay attention to the impacts of volatility in forex markets, housing prices in Seoul and its surrounding areas, and persistently high household debt. The board revealed that short-term inflation expectations have fallen to 3.0% as the annual inflation hit its lowest in 11 months of 2.4% in June. This year, the CPI could be slightly lower than the May forecast of 2.6%, with core inflation around 2.2%. The committee added that it would examine the timing of a rate cut while reiterating the need for inflation to stabilize around the target level in the medium term. Regarding the GDP, the economy is expected to expand around 2.5% in 2024, in line with earlier forecasts, supported by a gradual recovery in consumption, a favorable labor market, and higher export growth.