Korea Investment & Securities analyst Choi Ji-wook forecast on July 16 that the Bank of Korea (BOK) will raise the base interest rate once more in August. Choi maintained the year-end base rate forecast at 3% but changed the timing of the additional hike from October to August, projecting the final rate for this cycle at 3.25% with one more increase in the first quarter of next year. The forecast is based on South Korea's upward-revised first-quarter GDP growth rate and the high likelihood of quarter-on-quarter growth in the second quarter, with the August monetary policy committee meeting expected to present a 2026 growth forecast around 3%, up from 2.6% in May.
Choi Ji-wook Projects August Rate Hike and 3.25% Final Rate
Choi Ji-wook stated in a July 16 report that he maintains the year-end base rate forecast at 3% but changes the additional hike timing from October to August. He projects the final rate for this cycle at 3.25%, though uncertainty remains high. Choi forecasts one additional rate increase in the first quarter of next year. He explained that after observing the effects of two rate hikes in July and August this year, the BOK will implement a further increase in the first quarter of next year if additional growth and upward inflation pressure appear, or maintain the 3% level if not.
GDP Growth Projections Support August Timing Change
Choi cited South Korea's upward-revised first-quarter GDP growth rate and the high likelihood of second-quarter GDP quarter-on-quarter growth as grounds for the August rate hike forecast. He expects the August monetary policy committee meeting to present a 2026 growth forecast around 3%, compared to 2.6% presented in May. Choi projects second-quarter GDP growth at 0.5% quarter-on-quarter, higher than the BOK's 0.2% forecast, and 3.6% year-on-year. However, Choi assessed that linking high economic growth rates to an expanded number of BOK rate hikes is unreasonable. He noted that even if national income conditions improve, the private employment market—closely related to labor income distribution and demand-side inflation pressure—remains weak, and the BOK also expects employment recovery speed to be gradual.
July Inflation Expected to Decline to 2.7% Year-on-Year
Choi forecast July consumer price inflation at around 2.7% year-on-year, a significant decline from 3.2% in June. He projected core inflation at 2.4-2.5% and living costs inflation around 3%.
FAQ
What did Choi Ji-wook forecast about the BOK base rate in August?
Choi Ji-wook forecast on July 16 that the Bank of Korea will raise the base interest rate once more in August, maintaining a year-end forecast of 3% but changing the timing from October to August, with a final cycle rate projected at 3.25%.
Why does Choi expect a rate hike in August instead of October?
Choi cited South Korea's upward-revised first-quarter GDP growth rate and the high likelihood of second-quarter GDP quarter-on-quarter growth as grounds for moving the rate hike timing to August, with the August monetary policy committee meeting expected to present a 2026 growth forecast around 3%.
