HSBC: Bank of Korea Expected to Implement Preventive Rate Hike of 25 Basis Points This Week

Odaily Planet Daily News – HSBC economist Jin Choi stated that the market widely anticipates the Bank of Korea to implement a preventive rate hike of 25 basis points this week. Although there are still localized conflicts in the Middle East recently, the overall situation has eased, and international oil prices remain relatively stable. However, the Korean won continues to face depreciation pressure, core inflation remains resilient, and South Korea's economic growth outlook has improved. Jin Choi believes these factors are sufficient to prompt the Bank of Korea to take proactive rate hike measures rather than waiting for oil prices to decline further to cool inflation. He also pointed out that South Korea's AI-driven export boom is another critical factor the Bank of Korea needs to monitor. The significant revenue growth from exports may be transmitted to domestic demand through channels such as wage increases, higher capital expenditures, and fiscal policies. Moreover, broader spillover effects could fuel demand-driven inflation, potentially pushing the Bank of Korea into a deeper rate hike cycle. HSBC predicts that following this week's rate hike, the Bank of Korea will raise rates by another 25 basis points in the fourth quarter. Additionally, the risk of further rate hikes in 2027 is skewed to the upside. (Jin10)