A survey shows more than nine out of ten bond experts believe the Bank of Korea will hold its policy rate steady at 2.5% for a fourth consecutive time this week. Factors like an upward revision in economic growth forecasts and ongoing weakness in the Korean won bolster this outlook. The central bank's rate-setting meeting is scheduled for Thursday.
The Korea Financial Investment Association (KOFIA) polled 100 fund managers and traders from 47 financial institutions, with 96 respondents expecting the Bank of Korea (BOK) to keep the benchmark interest rate at 2.5%. This view is strengthened by an upward adjustment in the country's economic growth forecast and the prolonged depreciation of the Korean won.
The bond market sentiment index (BMSI) for December registered 103.2, a decline of 8.3 points from November's 111.5. A reading above 100 indicates market expectations for rising bond prices, which move inversely to yields. Among respondents, 21% anticipated an increase in bond yields next month, while 28% foresaw a decrease.
On foreign exchange, only 23% expected further weakening of the Korean won against the U.S. dollar in December, down sharply from 49% for the current month. The share anticipating a stronger won rose 27 percentage points to 30% from the previous month. KOFIA attributed this to the won-dollar rate approaching the psychological threshold of 1,480 won per dollar, alongside growing demand for currency hedging. The local currency has weakened recently, hitting a seven-month low of 1,477 won per dollar on Monday.
This survey reflects stable market expectations ahead of the BOK's decision, potentially easing uncertainties in monetary policy.