The U.S., which plans to cut interest rates only once this year, is likely to lower rates in Korea as well.

Fed changes its outlook for interest rate cuts from 3 times to 1 time this year
If the US cuts its benchmark interest rate in September, the Bank of Korea is expected to cut rates in October and November,

Jerome Powell, Chairman of the Federal Reserve (Fed) [Image Source=Yonhap News],
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, ‘As the Federal Reserve (Fed) changes its outlook for a benchmark rate cut from three times to one time by the end of the year, the speculation that the Bank of Korea will only cut rates once this year gains strength. Bank of Korea Governor Lee Ju-yeol also expressed his intention to avoid premature rate cuts at the ceremony commemorating the founding of the bank.’,
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, ‘The Fed maintained its benchmark rate at 5.25-5.50% during the Federal Open Market Committee (FOMC) meeting on the 12th (local time). The median forecast for the year-end interest rate in the newly released dot plot (a chart showing the expected future interest rate levels) was 5.10%. This is 0.5 percentage points higher than the forecast of 4.6% made three months ago, indicating a decrease in the expected number of rate cuts from three to one.’,
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, ‘As a result, the market expects the Fed to cut interest rates once either in September or November. The probability of a rate cut in September reflected in the federal funds futures market rose from 58.3% to 64.5%, while the probability of a rate cut in November increased from 88.6% to 102.5%.’,
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, Speculation of a rate cut by the Bank of Korea in the 4th quarter,
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, ‘With the expected timing of the interest rate cut in the U.S. being delayed, the speculation is that the Bank of Korea may lower its benchmark interest rate in the 4th quarter. The Bank of Korea has previously stated that it would be difficult to lower interest rates until there is confidence in price stability.’,
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, ‘Governor Lee mentioned at the ceremony celebrating the 74th anniversary of the bank’s founding, “If a premature rate cut stimulates prices and leads to a situation where interest rates need to be raised again, the policy cost to be borne at that time will be much greater” and emphasized the need to maintain the current monetary tightening policy until there is confidence that prices will converge to the target level.’,
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Lee Ju-yeol, Governor of the Bank of Korea, reading a speech at the Bank of Korea in Seoul, Jung-gu on the morning of the 12th commemorating the 74th anniversary of the founding of the Bank of Korea. (Photo provided by the Bank of Korea),
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, ‘The market also expects the Bank of Korea to keep the benchmark interest rate unchanged until July and August. The dominant prediction now is that there will be one rate cut in October or November in the 4th quarter. Until April, there were many predictions for interest rate cuts in the 3rd quarter, but with the delayed interest rate cuts in the U.S., the forecast timing has shifted to the 4th quarter.’,
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, ‘Joo Won, Director of the Economic Research Division at Hyundai Economic Research Institute, said, “If the U.S. lowers its benchmark interest rate once in September this year, it is expected that the Bank of Korea will also cut its benchmark interest rate in October or November,” and added, “Given the current importance of U.S. monetary policy, it is unlikely that the Bank of Korea will cut rates before the U.S.”.’,
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, ‘Kim Sung-soo, a researcher at Hana Investment & Securities, also explained that “it will be difficult for the Bank of Korea to cut interest rates before the U.S. under current conditions,” and said, “The U.S. will lower rates first, and the Bank of Korea is expected to cut the benchmark interest rate around October.”‘,
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, ‘An Jae-kyun, a researcher at Shinhan Investment Corp., also mentioned, “The Bank of Korea will act after confirming the change in the direction of the Fed’s monetary policy,” and stated, “We expect a rate cut in the U.S. in September and a rate cut by the Bank of Korea in October.”‘,
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, The government: “Continued uncertainty in U.S. monetary policy, need to be cautious of market volatility”,
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, ‘Meanwhile, this morning, Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok held a macroeconomic and financial meeting with Governor Kim Ju-hyun, chairman of the Financial Services Commission, and Director Lee Bok-hyun of the Financial Supervisory Service, stating, “Uncertainty about the timing and extent of the U.S. rate cut continues,” and emphasized that “as major countries’ monetary policies, such as rate cuts by the ECB and Bank of Canada, are diverging, it cannot be ruled out that volatility in the global financial markets may increase.”‘,
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, ‘Vice Governor of the Bank of Korea Park Jong-woo said, “Chair Powell showed a cautious stance that additional confidence in disinflation is needed for a rate cut, and the pace could be slower than expected,” and warned, “Given that market volatility may expand rapidly depending on the movements of key indicators such as prices and employment in the future, caution is needed.”‘,
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