Citi Forecasts BOK Rate Hike in August, Revises GDP Growth to 3.7% This Year
Additional Rate Hike Expected in August
2024 GDP Growth Forecast Revised Upward from 3.5% to 3.7%
Korea Citibank has forecast that the Bank of Korea's Monetary Policy Committee will raise interest rates consecutively at next month's meeting.
Shin Hyun-song, Governor of the Bank of Korea, is striking the gavel at the Monetary Policy Committee plenary meeting held at the Bank of Korea in Jung-gu, Seoul, on the morning of July 16, 2026. Photo by Joint Press Corps
View original imageJinwook Kim, an economist at Korea Citibank, stated in a report on the 16th, "If second-quarter GDP remains strong and demand-side inflation persists, there will be a consecutive 0.25 percentage point (p) rate hike at the Monetary Policy Committee meeting on August 27."
The final interest rate level is projected to remain at 3.50% per annum, as previously forecast. Kim moved up the expected timing of the policy rate hikes to August, November, and February next year.
Originally, he had expected 0.25 percentage point increases in July and October this year, and in January and April next year, with the final rate reaching 3.5% per annum.
Kim commented, "Although no specific level was stated for the neutral interest rate, if the economic cycle is expansionary, the policy rate should be raised above the neutral rate or toward the upper end of the neutral rate range."
Kim raised his GDP growth forecast for this year by 0.2 percentage points, from 3.5% to 3.7%.
The second-quarter GDP growth forecast was also revised up to 0.7%. The previous forecast had been 0.3% quarter-on-quarter.
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The Bank of Korea's Monetary Policy Committee raised the base interest rate by 0.25 percentage points (p) on this day, from 2.5% per annum to 2.75%. The Bank of Korea had maintained the base rate at 2.5% for 14 months after cutting it in May last year. This rate hike marks the first increase in three years and six months, since January 2023.
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