▲ Citibank Korea
Citibank Korea has projected that the Bank of Korea's base rate could reach 4.0% per annum as the pace of interest rate hikes accelerates faster than expected.
Kim Jin-wook, an economist at Citibank Korea, stated this in a report released today (June 15), noting that the central bank "could accelerate its tightening pace more quickly than expected, such as by raising rates consecutively in the second half of the year."
Kim initially projected that the Bank of Korea would begin raising rates in July and implement four consecutive 0.25 percentage point (p) hikes in October, January of next year, and April, ultimately reaching a terminal rate of 3.5% per annum.
However, he noted that the possibility of consecutive rate hikes in the second half, pushing the terminal rate to 4.0% per annum, is becoming more likely.
He analyzed that the impact of base rate hikes on growth and inflation has weakened compared to the past due to expansionary fiscal policy and changes in the structure of household debt.
He explained that as the government's capacity for fiscal spending increases due to rising tax revenue from the semiconductor boom, the pressure of interest rate hikes to slow the economy could be limited.
He also analyzed that the sensitivity of households to interest rates has decreased.
He projected that the impact of interest rate hikes on housing prices would be smaller than in the past, as the proportion of funds from stock and bond sales used for housing transactions is rapidly increasing due to loan regulations.
In another report, economist Kim noted that "stock valuation gains will affect consumption and the real estate market."
According to the report, the potential stock valuation gains for South Korean households in the first half of this year are estimated to reach approximately 1,146 trillion won.
As of June 12, the KOSPI has risen by approximately 93% compared to the end of last year.
The figures were -61 trillion won in 2024 and 429 trillion won in 2025.
He estimated that stock valuation gains could boost annual gross domestic product (GDP) and private consumption by 0.4% and 0.9%, respectively.
Furthermore, citing a Bank of Korea report that suggests about 70% of stock profits from non-homeowning households tend to flow into the real estate market, he emphasized that "stock market capital gains will accelerate the upward trend in the metropolitan housing market in the second half of this year."
He added, "Since recent housing financing channels are not directly related to mortgage loans, the impact of the Bank of Korea's interest rate hike cycle on the housing market's upward trend may be relatively limited."
(Photo: Provided by Citibank Korea, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.