DBS economists forecast a 25bps hike amid stronger GDP growth, persistent core inflation, and rising housing prices.
DBS economists expect the Bank of Korea to increase its base rate by 25bps to 3.00% at its August meeting, citing stronger-than-expected first-half GDP growth of 3.8% year-over-year. The central bank may also upgrade its 2026 GDP forecast to 3.5% from 2.6% and its 2027 CPI inflation forecast to nearly 3.0% from 2.3%.
Core inflation rose to 2.6% in July from 2.5% in June, while housing prices increased to 2.7% from 2.6%. Headline CPI moderated slightly to 2.8% in July from 3.2% in June. These factors may keep inflation above the BoK’s 2% target for an extended period.
A hawkish hold remains possible due to tightening financial conditions, including a stronger South Korean Won and heightened KOSPI volatility.