BOK sees policy rate at 2.50% in six months…dots also signal room for a cut or a hike

The median of the Bank of Korea (BOK) Monetary Policy Board’s projection for the policy rate six months ahead was presented at 2.50% per annum. The figure comes from the K dot plot, unveiled for the first time by the BOK on the 26th. Dots were also placed at both 2.25% and 2.75%, indicating that while limited, upside and downside possibilities remain open.

According to the K dot plot released for the first time on the 26th, Monetary Policy Board members placed 16 dots at 2.50% per annum. The outcome reflects Governor Rhee Chang-yong and the six board members each placing three dots to indicate their view of the rate level six months ahead. The result is interpreted as meaning that board members expect the policy rate to remain on hold for a considerable period.

Four dots were placed at 2.25% per annum, which is seen as suggesting the possibility of considering a rate cut. One dot was marked at 2.75% per annum. While the likelihood is very limited, it appears that one member left room for a hike by placing one of their three dots at the higher level.

The BOK disclosed this six-month-ahead rate outlook for the first time on the day. Previously, it had only referenced the possibility of a rate adjustment three months ahead, but the central bank said the use of specific figures and dots clarified its communication.

Kang Jin-kyu, reporter josep@hankyung.com