HSBC: Bank of Korea Expected to Deliver Preemptive 25bp Rate Hike This Week

Odaily Planet Daily News HSBC economist Jin Choi stated that the market generally expects the Bank of Korea to implement a preemptive 25 basis point rate hike this week. Although there have been recent local conflicts in the Middle East, the overall situation has eased and international oil prices have remained relatively stable. However, the Korean won still faces depreciation pressure, core inflation remains firm, and South Korea's economic growth outlook has improved.

Jin Choi believes these factors are sufficient to prompt the Bank of Korea to take a preemptive rate hike action rather than waiting for oil prices to fall further to cool inflation. He also pointed out that South Korea's export boom driven by artificial intelligence is another key factor that the Bank of Korea needs to monitor. The earnings from substantial export growth could be transmitted to domestic demand through channels such as wage increases, increased capital expenditure, and fiscal policy, while broader spillover effects could also fuel demand-pull inflation, prompting the Bank of Korea to enter a deeper rate hike cycle.

HSBC expects that after the rate hike this week, the Bank of Korea will raise rates by another 25 basis points in the fourth quarter; meanwhile, the risk of further rate hikes in 2027 remains tilted to the upside. (Jinshi)