BOK Signals Slower Tightening as Won Rallies Fades into Consolidation

The Bank of Korea has signaled that it will slow down its tightening cycle after delivering back-to-back 25bp rate increases, taking the policy rate to 3.0%. The central bank's six-month rate projections show a median forecast of 3.25%, implying one further 25bp increase over the next six months.

However, officials retain a tightening bias and expect the pace of moves to slow down after 50bp of cumulative hikes since July. A pause is expected in October and possibly November as policymakers assess the effects of recent policy action.

The South Korean won has already risen 12% against the US dollar, but the latest guidance points to a slower pace of further gains. Near-term price action is expected to lean towards consolidation, with USD/KRW seen trading in a 1,360-1,400 range.