Korea: BOK looks to be signalling a hike before year-end – Nomura

Analysts at Nomura suggest that due to the increasing concerns over Korean financial imbalances associated with the housing market, they have raised the probabilities they assign to near-tem rate hikes by BOK.

Key Quotes

“We now assign 30%, 60% and 10% probabilities to a 25bp rate hike to 1.75% in October, November and January, respectively. Previously, we assigned 10%, 40%, 30% and 20% probabilities to a 25bp rate hike in October, November, January and thereafter, respectively, as we trimmed our 2018 GDP growth forecast to 2.9% from 3.0%.”

“We believe that the BOK will wait to assess the impact of tighter measures (announced on 13 September) on the housing market.”

“The US midterm elections on 6 November could also be important for the BOK to watch as they could have some implications for US-China trade tensions and US-North Korea nuclear negotiations.”

“That said, of the last two BOK policy meetings of 2018 (18 October and 30 November), we believe November is more likely than October when it comes to the timing of the next 25bp rate hike to 1.75%.”