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Today’s meeting sent strong signals the BoK’s rate-cutting cycle has come to an end
 

The odds of further Bank of Korea easing seem low amid upgraded forecasts for South Korea’s GDP and inflation. Increased inflation concerns, risks linked to the weak KRW, and ongoing financial instability were all reflected in changes to the BoK’s forward guidance in the policy meeting statement.

In its forward guidance, the BoK removed the phrase “maintain rate cut stance” and instead added that it is “leaving room for potential rate cuts.” In our view, the BoK intends to convey that its easing cycle remains ongoing rather than concluded to mitigate the risk of abrupt movements in financial markets. Also, they appear to be closely monitoring any sudden change in market rates that may signal an impending rate hike.

Governor Rhee stated that it’s premature to consider a rate hike at this time, emphasising that changes in policy direction generally require a 12-month implementation period.

Additionally, today's decision was not unanimous. There was one dissenting vote, the same as the last meeting. Opinions on a rate cut in the next three months remain divided, and support for easing has dropped from four to three. Yet the idea has not been abandoned.

Nevertheless, it is anticipated that changes in macroeconomic conditions will prompt the BoK to end its easing stance.

The BoK have revised up its GDP and CPI outlook
 

The BoK expects the economy to grow 1.8% year on year (vs 1.6% previously) in 2026 and 1.9% in 2027. Strong chips and the IT cycle will boost growth more than previously expected. Stronger-than-expected third-quarter GDP is the main reason for the upward revision of 2025 GDP outlook to 1.0% (vs 0.9% previously).

In our view, the revision was rather moderate. We expect GDP to rise by 1.2% in 2025 and 2.0% in 2026 amid stronger-than-expected private consumption and exports. If upcoming data is solid, in line with our expectations, the BoK will revise up its outlook again next year.

CPI inflation for 2026 has been revised up from 1.9% to 2.1%, likely due to recent KRW weakness, which has driven higher-than-expected inflation. A 2.1% rate inflation isn’t a big deviation from the BoK’s target level, and thus shouldn’t be a major concern.

GDP/CPI outlook : ING vs BoK
 

Source: BoK and ING estimates

Concerns over household credit and high housing prices continued
 

Strict government controls on mortgages and home buying are gradually slowing the housing market, but underlying demand remains strong. The recent consumer sentiment survey showed that expectations for housing prices dropped but remain elevated. Thus, the BoK will have to monitor the housing market trends. We anticipate that the housing market will stabilise, at least in the short term, as the government considers implementing stricter measures. Nevertheless, this is unlikely to provide sufficient confidence for the BoK to lower the policy rate.

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