Foreign investment banks expect South Korea's central bank to raise the key rate sometime in the first half of next year, a report showed Monday.
According to the Korea Center for International Finance, foreign institutions, including JP Morgan, forecast that the Bank of Korea (BOK) will take a cautious stance on its monetary policy by the end of this year due to heightening geopolitical risks and some signs of an economic slowdown.
The central bank has maintained the base rate at a record low of 1.25 percent since June last year, but it has given hints that the BOK may take action in the coming future as a way to keep up with the U.S. Federal Reserve's monetary tightening.
Bank of America-Merrill Lynch, Barclays, City Group and Goldman Sachs anticipated that the BOK will increase the rate in the first quarter, while JP Morgan, Standard & Chartered and UBS said the BOK will likely join the upside trend in the second quarter.
Nomura, on the other hand, expected the South Korean central bank to put off the monetary tightening until the latter half.
Experts noted that the recovery pace of the South Korean economy seems to have slowed down as industrial production and private consumption remain lukewarm, overshadowing booming exports and investment.
Moreover, North Korean issues over the reclusive country's nuclear capability and possible military collisions have been dragging down economic sentiment in the country. (Yonhap)