Devayani Sathyan, and TusharGoenka

BENGALURU – Rates will be held on Thursday by the Bank of Korea, following back-toback increases at previous two meetings. Economists in a Reuters poll said that higher inflation could cause Bank of Korea to raise borrowing costs again next quarter.

Inflation in consumer prices in Asia’s fourth-largest country jumped to an all-time high of 3.6% during January. That’s still above the central banks’s 2% goal for a 10th consecutive month.

Since August 2013, the BOK increased interest rates by three times to help ease rising house prices and reduce household debt.

According to the poll, all 28 economists surveyed expected that the BOK will keep the base rate of 1.25% unchanged for its February 24 policy meeting. One economist predicted that the BOK would increase its base rate by 25 basis points at the meeting.

According to Oh Suktae economist at Societe Generale: “Inflation and GDP (gross Domestic Product), monthly industrial activity, employment, all support the BOK’s current hawkish position.”

On Thursday, he forecasts no rate change. Three consecutive rate increases would “be too difficult for policymakers,” he said. He expects that rates will rise to 2.0% by the year’s end.

Given the rising upside risk of inflation, it is important to be mindful that there are more chances for hikes. “We are not as confident about forecasting inflation here, just like other economists,” he stated.

According to economists, another reason the BOK should not be present on Thursday is that the country was set to vote for its next president during a March 9 national election. This Thursday meeting will be the last of BOK Governor Lee Juyeol.

Recent surveys found that the BOK was likely to increase Q2 and Q4 in 2019. This will raise the base rate by 1.75% at the end of 2022, and then another increase the following year to make it 2.00% at the end of 2023.

It was an improvement on a January survey, which put the base rate of 1.50% at the end this year.

Just under three quarters of the contributors to this poll provided predictions through December 31, and 16 out of 22 expected another increase by January 31.

The BOK would be able to keep pace with its Asian peers as well as the U.S. Federal Reserve. These two institutions have yet not hiked in the current cycle due to dramatic cuts made during the pandemic.

South Korea saw inflation hover between 2.1% and 2.8% during Q3, and then it dropped, remaining below the central banks’ 2% target. The poll was conducted by Reuters separately.

(Reporting and polling by Devayani Sathyan, Tushar Goenka and Alex Richardson; editing by Hari Kishan and Ross Finley.