Morgan Stanley Forecasts Further Rate Cuts by Bank of Korea

In a recent analysis titled "A Comfortable Return to Rate Cuts," global investment bank Morgan Stanley has projected that the Bank of Korea (BOK) will implement three more interest rate reductions by the end of 2023. This move aims to address the increasing downward pressure on economic growth.

Following a reduction from 3% to 2.75% last month, the BOK had hinted at one to two additional rate cuts within the year. However, Morgan Stanley's forecast includes an extra cut, anticipating the base rate to reach 2%.

Economic Growth Concerns Drive Rate Cuts

The decision is largely influenced by the unanimous recognition among the BOK's Monetary Policy Committee members of the heightened downward growth pressures. Despite concerns over inflation and foreign exchange volatility, the primary focus remains on mitigating growth challenges, particularly those related to tariffs.

Morgan Stanley also adjusted its forecast for South Korea's economic growth rate to 1.2% for the year, lower than the BOK's estimate of 1.5%, underscoring the cautious outlook on the country's economic recovery.