In line with consensus and our expectation, Bank of Korea (BOK) extended its interest rate pause to the fourth straight meeting today with the benchmark 7day repo rate staying at 3.50%.  

It also continued to maintain a tightening stance with all the board members open to a further 25-bps hike to bring the terminal rate to 3.75%. Although inflation is on a downtrend, the risk factors on prices and household debt still exist.  

The central bank maintained its GDP growth and headline inflation forecasts for 2023 at 1.4% and 3.5% respectively. Core inflation is projected to continue its slowing trend but may turn out to be slightly higher than the May forecast of 3.3%.  

Considering the soft economic outlook and the general slowdown in inflation, we continue to expect the BOK to stay on hold for the rest of 2023. We think a rate cut could come into view in 1Q24. The next monetary policy meeting will be held on 24 Aug.