DBS economists Radhika Rao and Mo Ji expect the Bank of Korea (BoK) to raise its base rate to 2.75% from 2.50% in July, citing persistent CPI inflation above 3% and resilient growth. They highlight robust exports and investment linked to the AI (Artificial intelligence) boom and note that Korean Won weakness and portfolio outflows further justify tighter monetary policy.<\/p>\n
Korean policy tightening backed by data<\/p>\n
“The Bank of Korea is expected to raise the base rate to 2.75% from 2.50% in July.”<\/p>\n
“The BoK signaled in June that it remains prepared to tighten monetary policy despite the recent decline in oil prices following the easing of tensions in the Middle East.”<\/p>\n
“CPI inflation has remained above 3% yoy for two consecutive months through June, and is expected to stay around this level for the remainder of the year, supported by lingering cost pass-through, elevated inflation expectations, and second-round effects.”<\/p>\n
“On the growth front, the economy continues to hold up well, driven primarily by robust exports and investment amid the AI boom.”<\/p>\n
“Meanwhile, the persistent weakness of the KRW, against the backdrop of portfolio capital outflows, provides an additional rationale for a rate hike.”<\/p>\n