66% of Bond Experts Expect Base Rate Hike at July Monetary Policy Board Meeting

Korea Financial Investment Association Releases August Bond Market Index
34% of Respondents Expect Interest Rates to Remain Unchanged

In July, more bond market experts expect the Bank of Korea to raise the base interest rate at the Monetary Policy Board meeting compared to the previous month.

The Korea Financial Investment Association announced on the 14th the results of its “August 2026 Bond Market Indicators,” which surveyed 100 professionals engaged in bond holding and management between July 3 and 8.

According to the survey, 66% of respondents said they expect the Bank of Korea to raise the base interest rate at the Monetary Policy Board meeting on July 16. This is a sharp increase from 1% in the previous month. Meanwhile, 34% of respondents expect rates to be kept on hold, while 0% expect a rate cut.

The Korea Financial Investment Association explained, “The proportion of respondents expecting a base rate hike increased compared to the previous survey as the tightening stance became clearer—reflected by consumer prices rising higher than the inflation target, an improving economic growth trend, and the monetary authorities publicly emphasizing the necessity of a rate hike multiple times.”

The composite BMSI came in at 86.2, up 1.1 points from the previous month, indicating that bond market sentiment has improved from the previous month. If the BMSI is below 100, it means bond prices are expected to decline (interest rates to rise), and sentiment is considered subdued. Conversely, if it exceeds 100, it indicates expectations of rising bond prices (interest rates falling) and robust market sentiment.

The Korea Financial Investment Association noted, “With mixed domestic and external variables such as ongoing geopolitical tensions in the Middle East and uncertainty over the future interest rate path, sentiment toward inflation and currency stabilization grew stronger, resulting in improved bond market sentiment for August.”

With variables such as increased global rate volatility and expectations that an increase in tax revenues will ease the burden of issuing more government bonds, the percentage of those expecting no change in interest rates rose to 56%, up from the previous month. The share of those expecting rates to rise fell to 30%, down 15 percentage points from the previous month, and those expecting rates to fall decreased to 14%, down 2 percentage points compared to the previous month.

Expectations for stable oil prices led to a decrease in respondents expecting inflation—from 52% last month to 19% this month. The proportion expecting a fall in prices increased from 2% last month to 18% this month.

As forex trading has been extended to 24 hours and sentiment towards improved exchange rates grew, the proportion of respondents expecting the won to strengthen (a lower exchange rate) increased from 15% last month to 43% this month. Those expecting the exchange rate to rise fell from 24% last month to 14% this month.

This content was produced with the assistance of AI translation services.