Bank of Financial market experts predicted on the 26th that the Monetary Policy Committee of the Bank of Korea will likely raise the base rate further in January next year.
The Monetary Policy Committee of the BOK raised the key interest rate by 0.25 percentage points the previous day to 1.00%, and Bank of Korea Governor Lee Ju-yeol suggested an additional increase in the first quarter of next year.
Hana Financial Investment predicted that the base rate would rise to 1.25% in January next year, 1.50% in the third quarter of the same year, and 1.75% in 2023.
Lee Mi-sun, a researcher at Hana Gold Investment, said, “On the premise that the 2% inflation rate and 3% economic growth rate will continue, we estimate that Korea’s base interest rate will eventually rise to 1.75% per annum.”
Cho Yong-gu Shinyoung Securities[001720] “The base rate will be raised again in the first quarter of next year and reach 1.25% per annum, and then the hurdles for further hikes will increase,” the researcher said.
Jo Jung-hyeon, a researcher at Shinhan Investment Corp., also maintained the prospect of an additional hike in the early 3Q after the 1Q increase, saying, “The Bank of Korea governor drew a line with political events in principle, but the possibility of delaying (an additional rate hike) to February is small.”
Experts considered that the sharp rise in KTB yields in September and last month had come to an end, considering the MPC and Governor Lee’s remarks the day before.
In the domestic bond market, market officials say that the three-year government bond yield has already reflected the possibility that the base rate will rise to 1.75% per annum in the process of rising to 2.20% per annum in mid-October.
Shinyoung Securities predicted that the yields on 3-year and 10-year government bonds would easily maintain the previous highs of 2.10% and 2.50% by the end of the year.
“The market interest rate will narrow the gap between expectations for a base rate hike and the market,” said Jo Jung-hyeon, a researcher at the market.
Researcher Lee Mi-sun explained, “Due to the nature of bond interest rates, a short-term decline followed after the final base rate was reflected in advance, and at least February to June next year is expected to be a rest period for monetary policy decisions.”
He also predicted that the yield on the 3-year government bond next month would move from 1.85 to 2.00% a year and the 10-year government bond yield to 2.25 to 2.45% a year, respectively, next month.
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