Bank of Korea Signals Interest Rate Hikes Near

The Bank of Korea held rates at 2.5% but two dissenting votes and higher economic forecasts signal an imminent tightening cycle. ING expects the first hike in July, with the policy rate likely reaching 3.25% by 2027.

Key Takeaways

• 1.The Bank of Korea maintained its policy rate at 2.5%, but two board members dissented in favor of a hike, signaling a hawkish shift.
• 2.ING forecasts a total of 75 basis points in rate hikes, with moves expected in July, October, and the first half of 2027.
• 3.BoK upwardly revised its GDP and CPI forecasts for 2026 and 2027, indicating that the economy will grow above potential with sticky inflation.

Table of Contents

• Bank of Korea signals interest rate hikes are near
• Clear hawkish shift and higher likelihood of two rate hikes in 2H26
• Higher GDP and CPI forecasts point to further rate hikes after 2026
• GDP and CPI revised upwardly for 2026 and 2027
• Our base case remains a total of 75 bp hikes, with moves likely in July, October and 1H27
• Recent Korean financial market moves were mostly driven by middle east situation and global trend
• Market rates tend to move ahead of the monetary policy cycle
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