Bank of Korea set to hold rates Oct 22, hike in November: Reuters poll

All 34 economists polled by Reuters between October 14 and 19 expect the Bank of Korea to leave its seven-day repurchase rate at 3.00 per cent when it meets on October 22. The anticipated pause would follow two consecutive increases. Median forecasts in the survey point to a hike to 3.25 per cent at the November meeting.

Policymakers have room to wait this month. Consumer inflation eased to 2.9 per cent in September from 3.1 per cent in August, though it remains above the BOK's 2 per cent target, and Governor Shin Hyun Song has called for time to assess the effects of the back-to-back hikes. Still, strong semiconductor-led growth, a recovery in domestic demand and elevated energy costs are likely to keep underlying price pressures firm.

BNP Paribas senior economist Jeeho Yoon said the BOK would "buy some time" but is not done with its hiking cycle, adding that risks are tilted to the upside as strong semiconductor-driven growth spreads into the domestic economy. Asia's fourth-largest economy grew 0.6 per cent in the April to June quarter and 3.7 per cent from a year earlier, and the poll forecasts 3.5 per cent growth this year. Inflation is projected to average 2.7 per cent this year before easing to 2.2 per cent in 2027.

The survey's median forecast sees the base rate climbing to 3.50 per cent in the first quarter of 2027 and staying there for the rest of that year, 25 basis points above the previous poll. Societe Generale economist Michelle Lam said a November hike remains likely because the BOK's CPI projections show inflation holding near 2 per cent for most of 2027, and she expects two more increases after October under her baseline scenario.

Beyond inflation and growth, the central bank is weighing financial-stability risks in housing, household debt and financial markets. House prices are still rising even as mortgage borrowing slows, Lam noted, suggesting rate hikes have not done enough to cool the property market. The benchmark KOSPI hit a six-month low on Thursday and triggered a circuit breaker for the 10th time this year, underscoring heightened market volatility.

Lam added that housing makes up about half of household assets while equities account for only 10 per cent, so an equity-market correction would have less impact than a house-price correction. She said a continued stock slump could affect the pace of the BOK's monetary policy tightening. Next week's third-quarter GDP data may show whether the export-led recovery is broadening into domestic demand.