Major foreign investment banks forecast South Korea’s central bank to freeze its key interest rate for the remainder of the year, while some expect a rate hike or a cut, a report showed Tuesday.

The Bank of Korea froze the benchmark rate at 3.25 percent in October for the fourth straight month as signs of the slowing global economy and eurozone debt crisis outweighed persisting inflation woes.

Most foreign banks, including JPMorgan and Goldman Sachs, forecast the BOK to stand pat on the seven-day repo rate until the end of this year as inflation risks are likely to weaken amid rising concerns about economic growth, according to the report by the Korea Center for International Finance.

JP Morgan projected the central bank to initiate a rate hike in the third quarter of next year if advanced economies’ fundamentals improve and South Korea’s growth momentum is deemed favorable.

Deutsche Bank, meanwhile, said the BOK is expected to freeze the rate until the end of the first half of next year and hike the rate two times in the second half.

Goldman Sachs said the central bank’s “rate normalization” is over for this year, adding a rate cut is also unlikely despite the country’s high household debt level.

However, some investment banks presented different outlooks, citing inflation concerns and external uncertainties.

Societe Generale forecast the central bank to stand pat on the policy rate next month, but did not rule out the possibility of a rate hike in December.

BNP Paribas, on the other hand, raised views on a rate cut.

Given the negative impact that an economic slowdown in the eurozone and U.S. economies can have on the local economy, there are chances the BOK may downgrade the benchmark rate this year, it said.
 

(Yonhap News)