U.S. investment bank Goldman Sachs predicted the Bank of Korea will hold off raising interest rate until October amid deteriorating economic conditions, regardless of the tightening actions in the United States.
Citing weakening industrial activity momentum and downside risks in the export front, the bank in a recent report said it was revising forecast for the next hike move to October from previous July.
The domestic market has expected the next rate move following the hike in November last year to come in July after Bank of Korea Governor Lee Ju-yeol struck out the possibility of a raise in the first half after keeping the policy rate unchanged at 1.50 percent in last policy meeting in April.
In March, the U.S. Fed raised the fed fund rate target to 1.50 percent to 1.75 percent and indicated two more hikes this year.
Lee on Thursday maintained reserve tone about the economic prospects.
“We cannot be positive about the economic conditions due to uncertainties at home and abroad,” he said voicing particular concern over the worsening job data.
The BOK holds the next meeting on May 24.
Goldman Sachs warned of headwinds in exports, the sole driver of the country’s economy, in line with the slowing tech cycle on top of the trade war between the U.S. and China. It predicted the BOK will be more engaged with the deteriorating data than inflation in deciding rate actions.
In Seoul trading on Thursday, the benchmark three-year bond yield closed down 2.3 basis points at 2.262 percent and five-year bond yield down 1.5 basis points at 2.551 percent.
By Yoon Won-sup and Cho Jeehyun
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