According to the Zhitong Finance APP, an increasing number of economists expect the Bank of Korea to maintain interest rates this month, despite most board members expressing a willingness to cut rates. However, plans to further lower borrowing costs will be postponed due to increased financial stability risks as housing prices in Seoul rebound.
Morgan Stanley's Chief Korea Economist Kathleen Oh stated that the firm expects the Bank of Korea to pause rate cuts again in October and then resume them in November, which differs from their previous view that action would be taken this month. She added that although the fundamentals of the Korean economy have not changed much since August, the rebound in housing prices indicates that policymakers will wait to assess the impact of upcoming housing measures.
Oh wrote in a report: &#34;We believe that the rate cut cycle of the Bank of Korea may be delayed rather than stopped. We think the government may introduce strong additional real estate measures this week to curb the overheating of housing prices in the fourth quarter and pave the way for further measures next year.&#34;
As of the end of September, apartment prices in Seoul have risen for the 35th consecutive week, despite the Korean government's previous measures to curb demand, with the rate of price increase still accelerating. The continuous rise in housing prices poses challenges for the Bank of Korea, which has kept interest rates unchanged in its last two meetings due to financial stability risks related to real estate.
In the most recent meeting of the Bank of Korea on August 28, five of the six board members expressed their willingness to cut rates within the next three months. Officials stated that the Federal Reserve's easing policy would provide the Bank of Korea with more room to focus on economic growth. Since October 2024, the Bank of Korea has cut rates four times, with its next policy meeting scheduled for October 23.
HSBC also expects the Bank of Korea to remain on hold this month. The bank's Korea economist Jin Choi wrote in a report last week: &#34;Given the heightened concerns about financial stability, recent communications have clearly turned hawkish.&#34; He also added that due to expected weak economic growth, forward guidance still leaves room for rate cuts.
HSBC also mentioned external stability risks, stating that the Korean won remains under pressure due to uncertainties in U.S.-Korea trade negotiations and the proposed $350 billion investment commitment to the U.S. The bank currently expects the Bank of Korea to cut rates by 25 basis points in both November and February but warned that &#34;the risks tend to be further delayed.&#34;
The overall Korean economy continues to face pressure as negotiations with the U.S. have stalled over tariffs and investment commitments. Under a trade agreement reached in July, the U.S. government imposed a 15% tariff on Korean goods, but negotiations have since stalled, including proposals regarding currency swap arrangements. This means that the U.S. has not yet issued an executive order to reduce auto tariffs from 25% to 15%, putting Korean automakers at a disadvantage compared to their Japanese competitors.
Morgan Stanley's Oh stated that the policy outlook for 2026 remains &#34;unclear,&#34; as housing sensitivity rises ahead of local elections and export risks persist
Oh pointed out: &#34;Given that we have confirmed the South Korean central bank's more serious concerns about the real estate market than expected from the statements of the monetary policy committee members, we now believe that the sensitivity of the real estate market is more important than the uncertainty of exports unless South Korean exports encounter unexpected shocks.&#34;

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More and more economists expect the Bank of Korea to maintain interest rates in October due to the financial stability risks posed by the rebound in Seoul's housing prices. Although some board members support a rate cut, policymakers will delay action to assess the impact of upcoming housing measures. Morgan Stanley and HSBC both believe that the rate cut cycle may be postponed, anticipating that the government will introduce measures to curb overheating housing prices. The next policy meeting of the Bank of Korea is scheduled for October 23

- Economists expect the Bank of Korea to maintain interest rates this month due to rising financial stability risks from rebounding housing prices in Seoul.  
- Morgan Stanley's Kathleen Oh suggests that while the central bank may pause rate cuts in October, it could resume them in November, influenced by upcoming housing measures.  
- The ongoing increase in apartment prices poses challenges for the central bank, which has kept rates unchanged in recent meetings amid concerns over financial stability and external economic pressures.

Seoul's housing prices overheating may delay interest rate cuts; economists expect the Bank of Korea to remain steady this month