BOK won’t change key rate: investment banks

Foreign investment banks see that the Bank of Korea is unlikely to change the benchmark interest rate by the second quarter of next year.

According to the new projection data, Barclays Capital, Citibank and Morgan Stanley projected that the central bank will keep steady the interest rate at 3.25 percent through the end of the second quarter next year.

Citibank and Morgan Stanley, in particular, forecast that the interest rate might be frozen until the third quarter of 2012. Barclays Capital did not put out its projection for the third quarter.

Bucking the trend was JPMorgan, which said the central bank would raise the rate by a quarter percentage point to 3.5 percent within between the fourth quarter this year and the first quarter of next year.

JPMorgan forecast that the central bank would hike the rate again in the second quarter next year, raising the benchmark interest rate to 3.75 percent, before keeping the rate steady in the third quarter.

The latest finding came after external factors coming from the troubled eurozone and the slowing economy of the U.S. put pressure on the Asia’s fourth-largest economy as well as rate-setting policymakers at the BOK.

Foreign investment banks cited the possibility that the country’s consumer prices would stabilize in the coming months, possibly raising the issue of slower growth rather than the risk of runaway inflation.

Earlier this month, the BOK kept its benchmark interest rate steady at 3.25 percent for a third month running, citing greater uncertainties in the global economy.

By Yang Sung-jin (insight@heraldcorp.com)