BENGALURU : The Bank of Korea will raise interest rates by another quarter percentage point on Friday, likely its last move in an aggressive tightening cycle aimed at quelling inflation running at more than twice its 2 per cent target, a Reuters poll has found.
A strong majority of economists, 36 of 40, in the Jan. 5-10 poll forecast the BOK to raise rates by 25 basis points to 3.50 per cent at its Jan. 13 meeting, which would be the highest since 2008. The other four expected no change. Three quarters of respondents, 30 of 40, forecast the key interest rate to remain unchanged at 3.50 per cent until end-March. But seven expected another hike by 25 basis points to 3.75 per cent and three predicted rates to still be at 3.25 per cent.
"Like the Federal Reserve, BOK will now move to higher for longer strategy instead of conducting further rate hikes beyond January. With household debt service elevated, further hikes beyond 3.50 per cent may cause additional downsides for the economy with limited impact on inflation."