BoK Review: All Signs Point to Hiking Path

Research evidence excerpt

BoK Review: All Signs Point to Hiking Path

Idea

May 28, 2026 09:59 AM GMT

Morgan Stanley Asia LimitedMBoK Review | Asia Pacific Kathleen Oh

Chief Korea/Taiwan Economist

All Signs Point to Hiking Path Kathleen.Oh@morganstanley.com +852 2848-7340

Exhibit 1 : The BoK made a hawkish hold on

The BoK made a sharp turnaround in its rate path, signalling an 28 May; we now expect a first hike in July

immediate hike as soon as July. Confidence in growth and BoK policy rate and our trajectory, %

BoK policy rate, % Our forecast Estimate of neutral rate range

4demand-driven price pressures point to a faster and longer cycle

than we had expected. We bring forward our first hike call to 3

July and raise the terminal rate to 3.5% by 2Q27.

2 BoK kept policy

rate at 2.5%

on 28 May

Key Takeaways 1

No-change decision by the BoK as expected, but two dissenters called for a hike,

signalling a move in July. May-20 Feb-21 Nov-21 Aug-22 May-23 Feb-24 Nov-24 Aug-25 May-26

Source: BoK, Morgan Stanley Research estimates

Dot plot revealed more hawkish-than-expected MPC projection – 10 dots at 3.0%

guide 2 hikes this year; 2 dots at 3.25% imply continued hikes next year.

Exhibit 2 : A sharp turn to higher rate Governor Shin showed strong confidence in growth and a rise in core inflation.

projection signals an immediate start to the

We now see the first hike in July vs. our prior call in October.

hiking cycle and potentially a longer-lasting

Given the core inflation forecast remains elevated for longer than expected, we one

raise our terminal rate forecast to 3.5% from 3.25% by end-2Q27.

BoK MPC dot plot: Next 6M conditional policy rate projection

(May 2026)

4.00

The decision: The BoK kept the policy rate unchanged at 2.5%, as was widely 3.75 May 2026 projection by the MPC Policy rate, %

expected.