Financial Committee, benchmark interest rate freeze may signal easing... Bond market attention

After the U.S. Supreme Court ruled that tariffs were illegal, causing turbulence in the domestic bond market, the upcoming meeting of South Korea’s Bank of Korea Monetary Policy Committee is attracting attention from the financial sector. The market expects this meeting to keep the benchmark interest rate unchanged at the current 2.5%. However, given the recent rapid rise in interest rates, mainstream analysis suggests that the Bank of Korea may adopt a more dovish stance in this meeting.

Last month, the Monetary Policy Committee showed sensitivity to the high exchange rate, revealing a hawkish (rate hike) stance. This has led market interest rates to rise to levels that almost reflect one or two rate hikes. Before the Lunar New Year holiday, the Bank of Korea and the Ministry of Economy and Finance continued to express concerns about the burden of rising government bond yields, striving to calm market worries about the sharp upward trend in current rates. Against this backdrop, the market expects the message conveyed in this meeting to be more moderate than last month.

Experts point out that if the Monetary Policy Committee reaches a consensus on maintaining high interest rates and confirms a more dovish stance, it is likely to have a positive impact on the bond market. The financial investment community is looking forward to an opportunity to ease the burden on investors amid already elevated interest rates.

Meanwhile, the Bank of Korea’s economic growth forecast is also closely watched. Currently, growth expectations may be revised upward from the original 1.8%, driven by increased semiconductor exports and a recovery in domestic demand. If the upward revision is interpreted as exceeding expectations, the market may see it as a signal that interest rates will remain unchanged for the long term.

The future trend of interest rates is expected to fluctuate within a range in the short term, without significant changes. However, many believe that further rate cuts will require clear policy shift signals, and the market will closely monitor the Bank of Korea’s subsequent actions to respond accordingly.