Commerzbank’s Charlie Lay and Dr. Henry Hao highlight that the Bank of Korea (BoK) kept its policy rate at 3.00% after two prior hikes, but delivered a clearly hawkish message. Strong semiconductor exports underpin higher growth expectations and rising inflation pressures. The authors note KRW strength since June and expect USD/KRW to consolidate in a 1300–1350 range near term.
BoK pause keeps tightening bias
“BoK said it now expects GDP growth in 2026 and 2027 to be “considerably higher” than its August forecasts of 3.3% and 2.9%, respectively, but did not provide new numbers. This was due to robust semiconductor exports and investment. There were no changes to the inflation forecasts.”
“BoK expects inflation to stay around the August forecast of 2.3% for 2026 and 2.5% for 2027. It expects core inflation to strengthen in 2027, reflecting persistent cost pressures and strengthening domestic demand. Overall, the decision to stay on hold should be seen as a pause rather than the end of the tightening cycle.”
“More importantly, BoK expects these gains to increasingly feed through to household incomes and private consumption, broadening the recovery beyond the export sector and adding to underlying inflation pressures.”
“BoK left the door open for a 25bp hike either in November or December this year. The upcoming Q3 GDP release, October inflation data and November economic projections will be important inputs.”
“For FX, BoK’s hawkish stance is providing some support for KRW, alongside the large current account surplus. USD/KRW was slightly lower yesterday at around 1,326. Since the end of June, KRW has strengthened by nearly 17% vs USD. We look for consolidation in the near term between 1300-1350.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
