BOK delivers back-to-back rate hikes, remains hawkish

According to Business Recorder, the Bank of Korea on Thursday lifted its key rate by one quarter of a percentage point, to 3.00%, a step that was widely expected. It is the central bank's second successive hike, made because price pressures remain above its goal and financial risks have not eased. The seven-member board moved the seven-day repo rate to its loftiest level since February 2025, a call that 18 of 35 economists in a Reuters poll had forecast.

The growth forecast for this year was lifted to 3.3% from 2.6% in July, while the 2.7% inflation forecast was left unchanged. Analysts' median view is for one more increase in the first quarter of 2027, then a pause until at least the end of next year, as policymakers weigh financial stability against a heated housing market. Capital Economics economist Gareth Leather said the economy is strong enough to handle the move, though the case for more hikes is less clear.

Bond markets had largely priced in the move, and treasury bond futures dipped 0.03 points to 103.29 by 0149 GMT. The refreshed six-month dot plot now puts 3.25% as the most likely policy rate for end-2026, with 10 of 21 dots at that level. Six others see the peak reaching 3.50%, while five expect rates to stay at 3.00%.