Nine out of ten bond experts forecast that the Bank of Korea's Monetary Policy Committee will freeze the benchmark interest rate at its meeting in July.

Lee Chang-yong, Governor of the Bank of Korea. /News1

The Korea Financial Investment Association announced the '2025 August Bond Market Indicators' containing this information on the 8th. Among those surveyed, 93% predicted that the Monetary Policy Committee would freeze the benchmark interest rate at the meeting on the 10th. This marked a surge of 62 percentage points compared to the previous survey.

The Korea Financial Investment Association explained that, while economic recovery is delayed, the possibility of overheating in the real estate market and uncertainties both domestically and internationally have led to a growing number of individuals anticipating a freeze in the benchmark interest rate.

Additionally, 42% of respondents expected the market interest rate to decline in August, an increase of 9 percentage points compared to the previous survey. Conversely, the percentage expecting the market interest rate to rise decreased by 7 percentage points to 4%. Factors such as the continued net buying trend of bonds by foreign investors contributed to a strengthened forecast for lower interest rates.

Expectations for August's inflation showed an increase in both responses for rising and falling prices compared to the previous month. The percentage predicting a price increase was 22% (up 7 percentage points), while the percentage predicting a decrease was 8% (up 4 percentage points). Although the recent consumer price increase exceeded market expectations, opinions seem to have diverged as the international oil price is trending downward following the easing of the Israel-Iran conflict.

Expectations for a decline in the exchange rate have diminished. Only 30% of respondents forecast a decrease in the exchange rate, which is a decrease of 22 percentage points from the previous survey. The percentage anticipating an increase in the exchange rate was 7%. The Korea Financial Investment Association noted that the decline in expectations for an interest rate cut by the U.S. Federal Reserve and increasing global trade uncertainties have strengthened the forecast for a stronger dollar, resulting in fewer individuals predicting a decline in the exchange rate.

The August bond market sentiment indicator (BMSI), which summarizes the survey results, rose by 6.1 points to 105.8 compared to the previous month. The BMSI is calculated based on individual survey questions regarding interest rates, prices, exchange rates, and so forth. A BMSI that exceeds the baseline of 100 indicates improved sentiment in the bond market.

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