Majority of sell-side and macro forecasters expect the Bank of Korea to raise
rates by 25bps, but policy paths diverge widely. Societe Generale, Morgan
Stanley, iM Securities, DBS Group, Nomura, Mitsubishi UFJ and a Reuters survey
(18 of 35 economists) all flag a 25bp move. DBS expects an additional 25bps in
Q4 to 3.25% and to hold through the end of next year. Societe Generale says the
governor signaled possible consecutive hikes in August; Morgan Stanley cites a
supportive macro backdrop; iM Securities warns the cost of delaying to October
is rising. Nomura and Mitsubishi UFJ point to core inflation, strong
semiconductor exports and a firm housing market as further upward pressure.
Citigroup projects a 25bp hike followed by increases in November and next
February to 3.5%, and says tightening could peak nearer 3.75%. By contrast,
HSBC, Eugene Investment Securities and Barclays expect rates to be left
unchanged at 2.75%; a Korea Financial Investment Association survey shows 79% of
bond-market experts expect no change while 20% expect a hike.
