Svmuu News: Jin Choi, an economist at HSBC, said the market widely expects the Bank of Korea to implement a preemptive 25-basis-point rate hike this week. Although there have been recent localized conflicts in the Middle East, the overall situation is easing, and international oil prices have remained relatively stable. However, the South Korean won remains under depreciation pressure, core inflation remains firm, and the country’s economic growth outlook has improved.
Jin Choi believes these factors are sufficient to prompt the Bank of Korea to take preemptive action on interest rates, rather than waiting for oil prices to fall further and thereby cool inflation. He also noted that South Korea’s AI-driven export boom is another key factor the Bank of Korea needs to monitor. The gains from strong export growth could be passed on to domestic demand through channels such as wage increases, higher capital expenditures, and fiscal policy, while broader spillover effects may also fuel demand-pull inflation, thereby pushing the Bank of Korea into a deeper rate-hiking cycle.
HSBC expects that, following this week’s rate hike, the Bank of Korea will raise rates by another 25 basis points in the fourth quarter; at the same time, the risk of further rate hikes in 2027 is tilted toward the upside. (Jin Shi)