Introduction#
Citi has indicated that the Bank of Korea might consider a rate hike during its upcoming monetary policy meeting on May 28. This speculation is based on anticipated upward revisions to the bank's economic forecasts for 2026.
Potential Rate Adjustments#
Citi now estimates that the Bank of Korea's median forward six-month conditional policy rate could be adjusted to between 2.75% and 3.00%, up from the previous 2.50%. This change reflects a more optimistic outlook for the economy, which could prompt the central bank to act sooner than previously expected.
Economic Growth Forecasts#
The firm predicts that the Bank of Korea will likely revise its 2026 GDP growth forecast upward to between 2.4% and 2.6%, compared to an earlier estimate of 2.0%. This revision is attributed to a strong economic performance in the first quarter of 2026 and the impact of fiscal stimulus measures aimed at boosting growth.
Inflation Expectations#
In addition to growth, Citi expects the Bank of Korea to adjust its 2026 Consumer Price Index (CPI) inflation forecast to between 2.6% and 2.8%, up from the previous 2.2%. The earlier forecast was based on assumptions about oil prices and economic output, which have since changed.
Conclusion#
As the Bank of Korea prepares to release its updated economic projections, market participants will be closely watching for any signals regarding potential changes in monetary policy.