Asia Economic Notes: Deciphering the BoK: A Hike in July

Research evidence excerpt

Asia Economic Notes: Deciphering the BoK: A Hike in July

Deutsche Bank

Research

Economics Date

Asia Economic Notes 28 May 2026

Deciphering the BoK: A Hike in July

Juliana Lee

Decision and Vote Split: The BoK kept the policy rate steady at 2.50%, but two Chief Economist

Monetary Policy Board members dissented in favour of a rate hike. +65-6423-5203

Bias: Tightening. The policy statement clearly points to the BoK’s tightening

stance, noting that “the Board will decide the timing of any rate hikes while

assessing the extent of the increase in inflationary pressure, the improvement

trend in the domestic economy, and financial stability.”

Inflation view: The BoK revised up its 2026 and 2027 inflation forecasts to 2.7%

and 2.3%, respectively, from its earlier forecasts of 2.2% and 2.0%, though these

remain below our forecasts of 2.9% in 2026 and 2.6% in 2027.

“Consumer price inflation rose considerably…Looking ahead, inflation is

expected to increase further, as the spillover effects of higher global oil prices

expand and as demand-side pressure stemming from income growth also

gradually strengthens…”

Growth assessment: The BoK revised up its 2026 and 2027 growth forecasts to

2.6% and 2.1%, respectively, from 2.0% and 1.8%, though these remain below our

forecasts of 2.9% in 2026 and 2.3% in 2027.

“The domestic economy has grown significantly…Going forward, the domestic

economy is expected to continue its improvement trend, supported by a strong

semiconductor sector and the supplementary budget, although the effects of

rising commodity prices and supply constraints may increase somewhat.”

Financial stability assessment: The BoK remained concerned, noting that, “in

financial and foreign exchange markets, high volatility in major price variables

continue….