DBS Group economists Taimur Baig and Radhika Rao expect the Bank of Korea to
raise the policy rate 25bp to 3.00% at the August meeting and say there is scope
to lift their 2026 GDP forecast from 2.6% to about 3.5% and 2027 CPI inflation
forecast from 2.3% to near 3.0%. Stronger-than-expected 1H growth, persistent
core inflation and rising house prices support further tightening. They caution,
However, that a hawkish hold at August’s meeting cannot be ruled out amid
tighter financial conditions after a sharp won appreciation and greater KOSPI
volatility; in that scenario the BOK may keep rates unchanged while signaling a
possible further hike in October.
