“The exchange rate has stabilized and the financial crisis is burdensome”… BOK predicts a ‘baby step’ on the 24th

Experts “Economic decline, United States tighten speed control also reduces the possibility of a big step”

In December, the interest rate gap between Korea and the US is likely to widen by more than 1.25% y… “Bank of Korea raises rate up to 3.75% next year”

BOK lowers next year’s growth rate forecast from 2.1% → 1.7~2.0%

(Seoul = Yonhap News) Reporter Park Dae-han and Min Seon-hee = Reporter Park Dae-han and Min Seon-hee = The Bank of Korea will reduce the range of interest rate hikes on the 24th and will only take a baby step’ (an increase of 0.25% point) rather than a ‘big step’ (an increase of 0.50% point in the base rate).

Although the first six consecutive base rate increases were inevitable due to the 5% level of consumer price inflation and the 1% point (p) interest rate gap with the US, the win/dollar exchange rate has stabilization and the risk of a squeeze in the capital market, including bonds, continues Experts find that the next big steps are demanding.

In addition, experts predicted that the BOK would lower its expectations for next year’s economic growth rate from 2.1% to 1.7-2.0%, reflecting the trend of slowing exports and consumption.

President Lee Chang-yong beat the donation

(Seoul = Yonhap News) The Governor of the Bank of Korea, Lee Chang-yong, kicks off a regular meeting of the Monetary Policy Committee held at the Bank of Korea in Jung-gu, Seoul on the morning of the 12th. 2022.10.12 [사진공동취재단] photo@yna.co.kr

◇ For the first time in history, 6 consecutive hikes are inevitable… At 5% inflation, the interest rate difference between Korea and the United States is 1%c

As a result of a Yonhap News survey on the 20th, most economists predicted that the Bank of Korea’s Monetary Policy Committee (Monetary Policy Committee) would raise the base rate by 0.25% percent at the monetary policy direction decision meeting on the 24th .

As expected, these are the first six cuts in history (April, May, July, August, October and November).

Experts are confident about raising interest rates because, above all, inflationary (inflationary) pressure, the highest level since the financial crisis, has not decreased significantly.

The October consumer price index (109.21) rose 5.7% from the same month last year. After reaching a peak in July (6.3%), the rate of increase fell in August (5.7%) and September (5.6%), then rose again in three months.

On the 2nd (local time), Korea (3.00%) and the United States (3.75-4.00%), which expanded up to 1.00% due to the fourth consecutive massive step by the US Federal Reserve (raising the base rate by 0.75% point). ) The difference between the base rate and the base rate is also a factor that puts pressure on the rate increase.

From the point of view of the gain, which is not a key currency such as the dollar (the base currency for international payments and financial transactions), if the base interest rate is significantly lower than the US rate, the risk of overseas investment funds are withdrawing and the value of the increases won is decreasing.

Ha Joon-kyung, an economics professor at Hanyang University, explained, “If you look at the current price alone, the need for the BOK to raise the base rate is great.”

[그래픽]    Consumer price trend
[그래픽] Consumer price trend

(Seoul = Yonhap News) Reporter Won Hyeong-min = According to the ‘Consumer Price Trends for October’ published by the National Bureau of Statistics on the 2nd, the consumer price index last month was 109.21 (2020 = 100), up 5.7% from the same month last year.
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◇ Successive major steps seem to be avoided… Consider exchange rate stabilization, capital crunch, and economic shock

However, in the case of the interest rate increase, the general analysis was that it was very likely to be limited to 0.25%p, not 0.50%p as in October.

The won/dollar exchange rate, which has recently fallen to the low to mid 1,300 won range, the risk of a capital and credit crunch in the bond market, which is still under fire, the possibility of a pace adjustment the interest rate increases in the United States, and the growing trend of economic decline are presented as the main reasons for the possibility of baby steps.

Joo Won, head of economic research at the Hyundai Research Institute, predicted a baby step and said, “Recently, the exchange rate is in a stabilization phase. It is difficult. Therefore, it will gradually fall below the exchange rate level appropriate of 1,250 won. .”

Cho Young-moo, a researcher at the LG Management Research Institute, said, “Since the announcement of the US consumer price inflation rate (7.7%) in October, there has been a voice in the market that the US inflation rate has passed its peak. “It’ r expectations that the intensity of monetary tightening in the United States will generally weaken, including the maximum level of interest rates and the timing of the transition to cuts, have also increased, and the Bank of Korea will take this atmosphere into account.”

He weighed in on the baby stage, saying, “Furthermore, the uncertainty in the bond market and the capital market that emerged after the Legoland incident has not been resolved.”

Park Jung-woo, an economist at Nomura Securities, said, “As the domestic economy is rapidly losing momentum along with the global economic slowdown, the economy will enter a full-blown recession next year.”

Already on the 12th of last month, at the time of the big step decision, two members of the Monetary Policy Committee (Ju Sang-young and Shin Seong-hwan) voted for a ‘baby step’, indicating the possibility of a recession economic.

One of the two members said, “It is desirable to maintain a stance of tightening in response to a high inflation trend, but considering the delay in the spread of monetary policy, the domestic economic growth trend in the middle and late next year. , when the recent monetary policy is expected to spread to the real economy, it is expected to slow down significantly.”

[그래픽]    Won/Dollar exchange rate trend
[그래픽] Won/Dollar exchange rate trend

(Seoul = Yonhap News) Reporter Hyung-min Won = On the 8th, the won/dollar exchange rate fell below 1,400 won per dollar for the first time in a month.
On this day, the exchange rate of the won against the dollar in the Seoul foreign exchange market closed at 1,384.9 won, down 16.3 won from the previous trading day’s closing price.
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◇ “The Bank of Korea will raise the rate further to a maximum of 3.75% in the first half of next year”

In fact, if the Bank of Korea stays on the baby stage this month, the gap between the base rate of Korea (3.25%) and the United States (3.75-4.00%) will be reduced to 0.75% p.

However, even if the Fed takes at least a big step in December, the gap widens again to 1.25 percentage points.

Moreover, experts observe that if the Fed raises the base rate further to 5% or more by the first half of next year as the market forecast, it is very likely that the BOK will continue to raise rates interest up to a similar point.

Professor Ha said, “The peak interest rate in the United States is expected to be in the 5% range. Therefore, the BOK will also continue to raise interest rates next year, at least until the beginning of next year. O considering the difference in interest rates between Korea and the United States, it is quite uncertain whether they will end at the 3.5% level and there is a possibility of rising even more.”

Researcher Cho also predicted, “The Bank of Korea will raise the interest rate by 0.25 percentage points twice more in the first half of next year, following 0.25 percentage points in November, so that the Korean benchmark interest rate will reach a maximum level of 3.75 per cent.”

Jang Min, a senior researcher at the Korea Institute of Finance, said, “The central bank’s rate hike will continue until the first quarter of next year, and the final rate is expected to be between 3.50 and 3.75 percent.”

Ahn Ye-ha Kiwoom Securities[039490] The researcher also analyzed, “The Fed’s final interest rate reaches 5.25%, and the Bank of Korea believes it can raise it to 3.75% in the first quarter of next year.”

[그래픽]    The prospect of an interest rate hike in the United States
[그래픽] The prospect of an interest rate hike in the United States

(Seoul = Yonhap News) Reporter Kim Young-eun = The Federal Reserve System (Fed), the central bank of the United States, made a statement immediately after the regular meeting of the Federal Open Market Committee (FOMC) on the 2nd (local time) and announced that it would raise the base rate by 0.75 percentage points.
Fed Chairman Jerome Powell mentioned the possibility of adjusting the pace of rate hikes in December as expected. However, he also showed a hawkish side (which favors monetary tightening), saying it was “very premature” to consider a switch to a rate cut.
Tweet @yonhap_graphics Facebook tuney.kr/LeYN1

◇ Bank of Korea may lower forecast growth rate for next year to upper 1% range

On the 24th, the Bank of Korea will also present a revised economic forecast along with whether or not to adjust the base rate.

Experts predict that the Bank of Korea will deliver a growth rate of 1.7 to 2.0 percent next year. Not only is 0.1-0.4%p lower than the previous 2.1% (August forecast), but it is also the lowest level since negative (-) growth in 2020.

Research Fellow Cho said, “We (LG Management Research Institute) believe there is a possibility that next year’s growth rate will fall into the mid-1% range.

He said, “Next year’s global economic downturn will slow exports, shrink investment in facilities, and it will be difficult for consumption to recover as expected. ” No. There is no factor that will improve the game.”

Senior Research Fellow Jang also said, “Given next year’s export conditions, there is a possibility that the Bank of Korea will lower its growth rate forecast to 1.7 to 1.8 percent.”

However, some experts analyze that there is a possibility that the consumer price inflation forecast for next year will be revised down by 0.1 to 0.2 percentage points from the previous 3.7 per cent, as inflationary pressures will decrease if the economy subsides. Economist Park suggested 3.6%, and Senior Research Fellow Jang suggested 3.5%.

shk999@yna.co.kr , pdhis959@yna.co.kr , ssun@yna.co.kr

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2022/11/20 06:27 Send

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