SEOUL: The Bank of Korea is considered certain to stand pat on policy at Friday's meeting, but analysts aren't ruling out another rate cut before year-end following an easing in August that was widely seen as giving in to political pressure to shore up growth.
All of the 31 analysts surveyed by Reuters forecast the central bank would leave its 7-day base rate unchanged at 2.25 percent at its Sept. 12 meeting to assess the effect of its 25-basis-point rate reduction last month.
The central bank has never moved the rate for successive months except during times of crisis.
The Aug. 14 rate cut was widely seen as a decision made under government pressure to supplement Finance Minister Choi Kyung-hwan's stimulus efforts, rather than kicking off a major policy-easing cycle.
"You can say the Bank of Korea has a neutral stance, but the finance minister kept expressing his concern about deflation risks, and I think this will lead to a further rate cut," said Kong Dong-rak, a fixed-income analyst at Hanwha Securities.
Indeed, analysts were largely split over the direction of the next rate move - a majority are predicting a rate increase sometime next year though a significant minority still see an additional cut in coming months.
Out of the 26 analysts who gave a clear view on the central bank's next policy move, 17 forecast the Bank of Korea would raise the rate next year while the remaining nine saw a cut.
Giving credence to the dovish-rate camp is an economy that continues to underperform after two years of sub-par growth, an inflation rate well under the central bank's 2.5-3.5 percent target range and, perhaps most importantly, overt government pressure.
The Bank of Korea is guaranteed by law to set interest rates independently from other government agencies but some of its past policy rate cuts, including one in May last year, have been made after the government ramped up pressure to spur growth.
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