Economic experts surveyed across financial markets overwhelmingly project that the Bank of Korea will hold its benchmark interest rate at 3.00% during its October 22 policy meeting. Following back-to-back hikes in July and August, policymakers are weighing cooling inflation and stabilizing currency pressures against ongoing household debt risks and lingering domestic demand.
Surveyed economists and institutional analysts widely expect the central bank’s policy board to leave the base rate steady at 3.00% when the Monetary Policy Board meets on October 22. The expected hold follows an aggressive tightening push in July and August, when policymakers executed back-to-back 0.25 percentage point increases to lift borrowing costs out of historical lows.
That back-to-back strategy marked the central bank’s first monthly rate hikes in over three years. Governor Shin Hyun-song defended the rapid response during a recent parliamentary audit, explaining that moving preemptively ahead of the U.S. Federal Reserve allowed the institution to avoid reactive and costly defense later. Yet with the benchmark rate now parked at 3.00%, analysts say the urgency for immediate additional tightening has cooled.
Inflation Cools While Exchange Rates Stabilize
Consumer price inflation slowed to 2.9% in September, easing from 3.1% the previous month and bringing core consumer inflation down to 2.8% compared to 3.4% in August. At the same time, the Korean won has strengthened against the dollar, hovering near the 1,330-won range, driven by exporter dollar-selling and an easing of imported commodity pressures.
These moderating figures have convinced economists that a third straight increase is unnecessary at this juncture. Joo Won, head of the economic research division at the Hyundai Research Institute, diagnosed that a third consecutive rate hike could place a considerable burden on households and domestic corporations,
analyzing that this meeting would take on the character of adjusting the pace to review the spillover effects of previous policies.
Park Seok-gil, an economist at JPMorgan, judged that because various factors are mixed together, such as the impact of oil prices and exchange rates on inflation, the Bank of Korea will determine that it needs to check the indicators slowly.
New household lending figures showed a contraction across the financial sector in September, while housing mortgage growth decelerated to 3.3 trillion won from 4.3 trillion won in August.
Analysts Expect Hawkish Holds and Higher Terminal Rates
Forecasters from major financial firms anticipate a hawkish hold
—a unanimous hold or a decision accompanied by a hawkish dissenting vote—designed to preserve policy flexibility for November.
Underlying price pressures persist above the central bank’s 2% target, and semiconductor-led export growth continues to feed domestic income gains. Consequently, several major research houses have adjusted their terminal rate expectations upward. While previous dot plot medians pointed to a peak of 3.25%, half of the surveyed experts in a recent market poll argued that terminal rates could ultimately climb to 3.75% if export momentum and service sector demand remain firm through early next year.
Commercial Banks Raise Household Lending Rates
Commercial lending rates have climbed sharply in response to prior central bank adjustments and funding cost changes.
Variable mortgage rates at major commercial institutions such as KB Kookmin Bank and Woori Bank have adjusted upward to a range of 4.66% to 6.20%. For a borrower holding a 300 million won loan, every 0.25 percentage point increase translates to an additional annual interest burden, heightening debt service risks for vulnerable borrowers as household credit balances surpass the 2,000 trillion won mark.
Federal Reserve Divergence and Upcoming Third-Quarter GDP Data
In the United States, September consumer prices rose 3.7% from a year earlier, surpassing prior readings and pushing producer price gains to their steepest monthly advance since 2022. CME FedWatch probabilities reflect expectations that the U.S. Federal Reserve will likely hold rates steady during its late October meeting while keeping the door open for further action before year-end.
The central bank is scheduled to review third-quarter real GDP growth following the policy meeting.
