October 16, 2018 / 2:51 AM / a month ago

POLL-S.Korea central bank to keep rates unchanged but signal Nov hike

* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/cb-polls?RIC=KROCRT%3DECI poll data

* 14 of 21 economists polled see BOK on hold this week

* 17 of 19 expect hike in Nov

* Subdued growth, global uncertainties keep policymakers cautious: economists

By Hayoung Choi

SEOUL, Oct 16 (Reuters) - South Korea’s central bank is broadly expected to keep its benchmark rate steady at its policy meeting on Thursday but could signal a possible tightening in November, according to a Reuters poll of analysts.

Fourteen of 21 respondent saw the rate unchanged at 1.5 percent, the poll showed on Tuesday, while 17 of 19 respondents expected a hike at the November meeting.

Bank of Korea Governor Lee Ju-yeol has raised concerns about the widening gap between South Korean and U.S. interest rates as the Federal Reserve tightens its monetary policy. Domestically, rising household debt has also built the case for higher rates. However, the slow economic recovery is likely to keep policymakers cautious.

“The job market continues to be sluggish while the consumer sentiment has not revived yet,” said Kim Youn-bo, an analyst at Cape Investment & Securities. “The BOK is likely to delay the hike to the November meeting.”

South Korea’s labour market recovered modestly from a month earlier with the unemployment rate falling to 4.0 percent from 4.2 percent in seasonally adjusted terms, but analysts saw little scope for significant improvement in the near-term.

Consumer price index growth accelerated to 1.9 percent in annual terms in September from 1.4 percent in August, but remains below the BOK’s target level at 2.0 percent.

“Conditions for a hike have been met, considering inflation is picking up and growth rates are at potential rates even if they’re revised down,” said Park Sung-woo, an analyst at Heungkuk Securities. “But the hike in October could look improper if the BOK is set to cut the economic growth rate.”

South Korea’s three-year treasury bond futures moved to price in an interest rate hike following comments from BOK Governor Lee last week flagging concerns about rising household debt and the need to adjust policies accordingly.

However, he also suggested that the growth outlook could be downgraded from 2.9 percent estimated in July. The governor will announced the revised growth outlook on Thursday at 04:30 GMT.

“Governor Lee has reaffirmed his determination to raise rates earlier this month,” said Oh Suk-tae, an economist at Societe Generale, who expects a hike on Thursday, revising an earlier forecast that had rates on hold for the rest of the year.

Recent comments from South Korea’s prime minister and land minister supporting a rate hike as a curb on soaring property prices have also fueled expectations of a near-term tightening.

Despite broad expectations of steady rates, 12 of those respondents in the poll who expect no change said there will be at least one dissenter calling for a hike this week in the seven-member board.

Analysts at Nomura, who forecast the central bank will keep rates unchanged this week, expect there will be one or two board members calling for hikes in a bid to send a clear signal to the public that the BOK will eventually tighten policy.

Reporting by Hayoung Choi; Additional reporting by Yuna Park, Joori Roh and Jeongmin Kim; Editing by Sam Holmes

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