BENGALURU- South Korea’s central bank will scale back its tightening pace on Thursday and hike rates by a modest 25 basis points amid signs of slowing domestic growth, despite high inflation and an aggressive US Federal Reserve, a Reuters poll found.
South Korea’s economic growth was fast losing momentum at latest measure as higher living costs erode household income and crimp demand, pressuring the Bank of Korea (BoK) to strike a balance between inflation and growth.
Still, with inflation well above the central bank’s 2 percent target at 5.7 percent in October, along with aggressive tightening from the Fed, the Bank of Korea still has a bit more to do before pausing.
All but one of 30 economists in the Nov. 15-21 poll forecast the BoK would raise its policy rate by 25 basis points to 3.25 percent on Thursday. One expected a 50 basis point hike.
If the majority view prevails, the BoK will take rates to the highest level since 2012.
“The combination of still-elevated inflation, and a hawkish US Federal Reserve means that the central bank’s rate-hike cycle has further room to run,” noted Krystal Tan, economist at ANZ.
“Amid climbing concerns about growth and the credit market, the case for hiking at a more gradual pace has strengthened further.” — Reuters
