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South Korea’s BoK seen raising rates to 3.00% in August

DBS forecasts a possible hawkish hold in August if financial conditions tighten, with room for a further October hike and a 2027 CPI outlook revised toward 3.0%.

Reported · Written up by our desk · Central Banks

DBS economists Taimur Baig and Radhika Rao expect the Bank of Korea to lift its base rate by 25 basis points to 3.00% at the August meeting, supported by upgraded GDP and CPI forecasts. They point to stronger-than-expected growth in the first half, persistent core inflation pressures, and further increases in housing prices.

The economists also flagged inflation and cost pressures as a key reason for the tightening bias. They cite that headline CPI eased to 2.8% year over year in July from 3.2% in June, while core CPI edged up to 2.6% from 2.5%, and housing prices rose further to 2.7% from 2.6%.

DBS expects the BoK could revise its 2027 CPI forecast to close to 3.0%, up from 2.3%, based on the ongoing inflation picture. However, they add that a hawkish hold at the August meeting remains possible due to tighter financial market conditions.

According to DBS, financial conditions have tightened amid strong won appreciation and higher KOSPI volatility, which could lead the BoK to keep rates unchanged while signaling a potential further hike at the October meeting.

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