What is the expected decision of the Bank of Korea regarding the base rate on May 28?

The Bank of Korea is expected to hold its base rate at 2.50% on May 28.

Why is the Bank of Korea's decision important?

The BOK's decision is critical as it reflects the central bank's response to inflation pressures driven by external factors.

Twenty-one of 29 respondents predict at least one rate hike by end-September.

The BOK's policy decisions are influenced by external geopolitical events and current inflationary pressures.

What: The Bank of Korea is expected to hold its base rate at 2.50% on May 28, amid rising inflation and changing economist forecasts.
Who: Bank of Korea (BOK), economists polled by Reuters, and market analysts.
Why it matters: The BOK's decision is critical as it reflects the central bank's response to inflation pressures driven by external factors, which could influence monetary policy across the region.

Thirty of 32 economists polled by Reuters expect the BOK to leave its base rate unchanged at 2.50% at the May 28 meeting, with only two forecasting a rise.
Twenty-one of 29 respondents predict at least one rate hike by end-September, a dramatic shift from last month when just three of 30 expected a move.
South Korea's April inflation rate of 2.6% was the highest in nearly two years, breaching the BOK's 2.0% target, with oil prices holding mostly above $100 a barrel for close to three months.
South Korea's Q1 GDP expanded 1.7%, the fastest pace in nearly six years, and economists expect the BOK to revise up its full-year growth forecast from 2.0% on Thursday.
Of 29 economists providing end-2026 forecasts, 17 see the base rate at 3.00%, six at 2.75%, and six unchanged at 2.50%.

The Bank of Korea's policy decisions are influenced by external geopolitical events, such as the Iran conflict, which have a direct impact on energy prices and inflation.
Historically, the BOK has maintained a cautious approach to rate hikes, but the current inflationary pressures and economic growth may necessitate a shift in this stance.

Immediate implications include market sensitivity to the BOK's rate decision and the potential for increased volatility in the Korean won and short-end rate markets.
Long-term implications could see a shift in the BOK's monetary policy framework as it adapts to sustained inflationary pressures and strong economic growth, potentially leading to a more aggressive tightening cycle.

Potential risks include the impact of further geopolitical tensions on energy prices, which could exacerbate inflation beyond current expectations.
Competition from other central banks in the region may influence the BOK's decision-making process, particularly if those banks adopt a more aggressive tightening stance.

The upcoming BOK meeting on May 28 will provide insights into the bank's near-term policy direction and any revisions to growth forecasts.
Future developments to watch include inflation trends, particularly in energy prices, and how they may influence the timing and magnitude of rate hikes moving forward.