Stocks Are Tumbling. Will the BOK Still Hike?

A preview of the October 22 Monetary Policy Board meeting. All four brokerage reports that explicitly forecast October's decision expect the Bank of Korea to hold rates. The disagreement is over dissenting votes for a hike—and what comes next.

MEETING: Thursday, October 22 · Monetary Policy Board rate decision; next meeting November 26¹
BASE RATE: 3.00% · July 16: 2.50% → 2.75%; August 27: 2.75% → 3.00%^{2, 3}
AUGUST VOTE: 6 to 1 · Board member Hwang Keon-il voted to keep the rate at 2.75%³
AUGUST DOT PLOT: Median six-month outlook 3.25% · 16 of 21 dots above 3.00%⁴
SEPTEMBER INFLATION: Headline CPI 2.9% · Excluding food and energy 2.8%⁵

Seven Board Seats, Three Possible Votes

Illustrative only · Not actual seating

HikeHold

The August vote is based on the BOK's official Monetary Policy Decision. The other two diagrams illustrate brokerage scenarios; seat assignments do not represent individual Board members.

The KOSPI fell 21.6% from 7,080.92 on September 23 to 5,554.22 on October 15 (Snowshagal calculation).⁶ It closed at 5,768.01 on October 19.⁷ The Bank of Korea sets its base rate again on October 22. All four brokerage previews that explicitly address this meeting expect a hold at 3.00%. This note asks the harder question: could the stock-market selloff delay further hikes? We look at what the BOK did during a similar episode three months ago, what current market prices imply, the implications for bank earnings, and the counterargument offered by a strengthening won.

AT A GLANCE

Every October-specific preview calls for a hold. The disagreements concern dissent (Hana sees a unanimous vote; Eugene considers a hike dissent unlikely; Kiwoom and Hanwha expect one) and the subsequent rate path. Hana and Hanwha forecast two more hikes, in November and February, taking the rate to 3.50%. The median of the BOK's August dot plot points to 3.25% six months out.
The BOK has raised rates on a day when stocks were plunging. On July 16, the KOSPI fell sharply before the rate announcement, triggering a sell-side trading curb, and the BOK hiked that day. But the Board could not have considered the additional losses through July 30, which had yet to occur. By its next hike in August, equities had already rebounded substantially.
Markets repriced the distant path more than the next move. From October 12 to 16, six-month OIS barely moved, while the one-year forward rate starting one year ahead fell 26 basis points. Hana interprets a roughly 20bp spread between the three-month Monetary Stabilization Bond yield and the base rate as pricing in an almost 80% chance of a November hike, but does not disclose its calculation. Turning a yield spread into a probability requires further assumptions.
Third-quarter bank NIMs are expected to fall despite successive hikes. Banks have replaced low-cost deposits that flowed out with pricier time deposits and bank bonds. Even if the BOK holds in November, the repricing of loans following its July and August hikes should still feed through from the fourth quarter.
The counterargument is the won. USD/KRW reached 1,330.3 on October 19, its lowest level since October 2024. Oil's contribution to inflation is also projected to decline toward year-end. Keeping policy restrictive and raising rates again are not the same decision.

PREVIEWS · SIX RESEARCH NOTES

One Hold Consensus, Different Fine Print

We compared six BOK-related publications from five brokerages dated October 16–19. The four that state an explicit October call all forecast a hold. The other two—annual outlooks from Hanwha and iM Securities—inform our comparison of the subsequent tightening path. The differences come down to three questions: Will anyone dissent in favor of a hike? Is the next hike in November? And where does the cycle end?

Six Views Ahead of the October BOK MeetingIn publication order · The first four state an October call · Two Hanwha notes involve the same fixed-income analyst and should not be treated as independent votes
Firm · Date	October	Dissent	Next Hike	Terminal Rate	Rationale
Hana SecuritiesPark Jun-woo · Oct. 16	Hold	None (unanimous)	November	3.50% (Nov. and Feb.)	Positive output gap and underlying inflation pressure; three-month MSB yield about 20bp above the base rate⁸
Eugene Investment & SecuritiesKim Ji-na · Oct. 19	Hold	Unlikely	Expected signal for November	Not specified	August guidance implies one further hike; equity weakness unlikely to change the BOK's stance materially⁹
Kiwoom SecuritiesAhn Ye-ha · Oct. 19	Hold	One vote to hike	November	Another hike in H1 2027 (number unspecified)	September exports +83.5%; semiconductor exports $60.3bn; headline/core CPI 2.9%/2.8%¹⁰
Hanwha Investment & SecuritiesKim Seong-su · FI Weekly · Oct. 19	Hawkish hold	One vote to hike	Not stated in note	Not stated	No fundamental justification for the decline in forward rates; foreign investors have covered 82% of measured net KTB futures selling¹¹
Hanwha Investment & SecuritiesResearch Center · 2027 Outlook · Oct. 19	Not addressed	Not addressed	November	3.50% (Nov. and Feb.)	Inflation expectations in the mid-to-high 2% range, positive output gap, apartment prices, and Korea–U.S. rate differential¹²
iM SecuritiesKim Myung-sil · 2027 Bond Outlook · Oct. 19	Not addressed	Not addressed	Q4 (month unspecified)	3.50% by Q1 2027; upside risk to 3.75%	Whether semiconductor-export volume gains spread into domestic demand¹³

Most of the stated terminal-rate forecasts converge on 3.50%. Hana and Hanwha's 2027 outlook call for hikes in November and February; iM places them in Q4 and Q1 2027. Kiwoom projects another hike in H1 2027 after November but refers to both Q1 and H1 in its report.¹⁰ The benchmark for comparison is the BOK's August dot plot.

FIGURE 1

August Dot Plot: Six-Month Median at 3.25%; Hana and Hanwha's 3.50% Terminal Call Aligns With the Six Highest Dots

Conditional six-month base-rate projections: seven Monetary Policy Board members each submit three dots · May's plot looks roughly to November; August's looks roughly to February, so the forecast horizons end at different dates

August distribution: 3.50% (6 dots), 3.25% (10), 3.00% (5). May: 3.25% (2), 3.00% (10), 2.75% (7), 2.50% (2). Diamond marks the 3.50% terminal-rate forecasts in Hana and Hanwha's 2027 outlook. Source: BOK, as reproduced by Aju Economy. Graphic: Snowshagal.⁴

At his August 27 press conference, the BOK governor explained the dot plot this way: 'The median is 3.25%, implying one further hike from here. But having already hiked twice, we need time to assess the effects.' He described the expected pace as 'gradual tightening.'¹⁴ Crucially, the dot plot is a conditional outlook: each member allocates three dots to reflect a probability distribution for future rates.¹⁵ It is not a pledge to hike at any particular meeting. Hana and Hanwha's annual outlook both project a move to 3.50% through November and February hikes—earlier than the dot plot's six-month horizon, and a larger cumulative increase than its 3.25% median.^{8, 12}

PRECEDENT · JULY'S SELLOFF

What the BOK Did When Stocks Were in Free Fall

The market has been here before. On July 16, three months ago, the KOSPI plunged before the BOK's rate announcement. It opened at 6,960.50, down 4.45%, and a sell-side program-trading curb was triggered around 9:10 a.m.¹⁶ The BOK raised its base rate from 2.50% to 2.75% that day—the first hike since January 2023.² The KOSPI closed at 6,820.60, down 6.37%.¹⁷ But the full 23.2% decline from July 15 through July 30, ending at 5,593.56, was not information available to the Board when it voted on July 16.^{18, 19} By the time the BOK hiked again to 3.00% on August 27, the index had recovered substantially, including a 17.9% one-day rebound on July 31.^{3, 20}

THE JULY ROUTDecision: July 16 · Cumulative drawdown: July 15–30

KOSPI ON DECISION DAY

−6.37%

Opened at 6,960.50 (−4.45%); sell-side curb around 9:10 a.m.; closed at 6,820.60^{16, 17}

CUMULATIVE THROUGH JULY 30

−23.2%

July 15: 7,284.41 → July 30: 5,593.56 · July 31: +17.9% in one session · Aug. 27 hike-day close: 6,912.37^{6, 18, 19, 20}

SIX-MONTH OIS

+5.5bp

Expectations of near-term hikes strengthened during the selloff; the original Hanwha note does not report the change in the 1y1y forward rate¹¹

BANK OF KOREA

7/16 +25bp · 8/27 +25bp

Aug. 27 vote: 6–1; policy statement noted stocks had 'plunged, particularly in semiconductors, before recovering somewhat'^{2, 3}

THE CURRENT SELLOFFSept. 23–Oct. 15 · Next meeting: Oct. 22

KOSPI AHEAD OF THE MEETING

−21.6%

7,080.92 → 5,554.22 (Snowshagal calculation) · Oct. 19: 5,768.01^{6, 7}

SIX-MONTH OIS

3.30%, little changed

Over the same week (Oct. 12–16), the one-year OIS forward rate starting one year ahead fell 26bp, from 3.973% to 3.715%¹¹

BANK OF KOREA

10/22 ?

All four October-specific brokerage previews expect a hold

Hanwha's July comparison covers July 15–30, but the July 16 decision came during the first day's trading, before the subsequent losses occurred. The current window begins at the Sept. 23 peak. Declines are calculated from closing-price reports and Snowshagal market records. Bars are scaled to a 25% maximum drawdown for comparison.

Market prices need to be compared on a like-for-like basis. Six-month OIS rose 5.5bp during the July 15–30 rout. This time, it barely moved over October 12–16, while the 1y1y OIS forward rate fell about 26bp in the same week. The observation windows differ, but the pattern shows that near-term rate expectations and longer-dated pricing need not move together. Forward rates also reflect term premiums and positioning, not just the expected policy rate. Has the market abandoned a November hike—or kept the near-term hike on the table while marking down the path thereafter? Foreign investors bought a net 34,789 three-year KTB futures contracts on October 12, the largest single-day net purchase since 2005. Hanwha views the decline in forward rates as 'a price adjustment driven by the stock shock and market flows, not a change in the BOK's policy signal,' pointing to the governor's repeated commitment to restrictive policy during a parliamentary audit and an IMF discussion.¹¹

'We should probably pay closer attention to semiconductor prices than to the share prices of semiconductor companies.'

BOK Governor Hyun Song Shin · July 16 press conference. At the same event, he said he did 'not fully agree' that higher interest rates were the reason stocks had fallen.²¹

By the measure the governor set out in July, semiconductor stock prices and chip-pricing prospects are now pointing in different directions. Hana expects Q3 DRAM prices to have held up better than anticipated and Q4 price increases to exceed its previous forecast. That is the opposite of the direction taken by Korean memory stocks, which have fallen back toward their late-June lows.²² Semiconductor exports reached $12.2bn in October 1–10, up 170.9% year on year. One important caveat: there were 5.5 working days, compared with 3.5 a year earlier—two additional days.²³ Asked at an October 12 parliamentary audit whether the next hike would come in October or November, the governor replied that 'the most important factor is the inflation trend.'²⁴

Three Channels Through Which a Stock Selloff Could Change the Rate Decision

Share prices are not themselves a BOK policy target. For an equity rout to alter the rate decision, it must spill over into financial stability, consumption, or the inflation outlook. Here is what the central bank and brokerages have said about those channels.

①FINANCIAL STABILITY

Governor, July 16: 'Unlike debt, equities have relatively few channels through which they create systemic risk.'²⁵

Watch: margin calls and forced selling, credit stress, corporate bond and commercial-paper yields

②CONSUMPTION

Eugene Securities: the BOK has repeatedly argued that movements in Korean equities have a smaller effect on consumption than in other economies.⁹

Watch: consumer confidence and card-spending data

③INFLATION OUTLOOK

Governor, Oct. 12: 'The most important factor is the inflation trend.' Kiwoom cites increased financial-market volatility as a reason to hold in October.^{10, 24}

Watch: the inflation path in November's economic projections

The two episodes are not directly comparable. By the August hike, the KOSPI had risen 23.6% from its July low to 6,912.37 (Snowshagal calculation). USD/KRW stood at 1,443.97 at the end of July—more than ₩110 above its current level.²⁶ This time, equities remain close to their lows just before the meeting, and longer-dated rate expectations have also declined.

MARKET · PRICING THE PATH

How Much of a November Hike Is Priced In?

What if we look at prices instead of brokerage forecasts? Each instrument reflects a different part of the curve. The three-month Monetary Stabilization Bond and six-month OIS have not substantially erased expectations of a near-term hike. The 1y1y forward rate, by contrast, has repriced the path beyond it.

3M MSB YIELD − BASE RATEAbout 20bpAround Oct. 16 · Hana chartHana: roughly an 80% implied probability of an October hold followed by a November hike⁸

SIX-MONTH OIS3.30%Oct. 12–16 · Little changedThe same gauge rose 5.5bp during July's rout¹¹

1Y1Y OIS FORWARD RATE3.715%Oct. 12–16 · Down 26bp (from 3.973%)Hanwha: a decline in fears of a 3.75% endpoint; this is not itself a forecast of the terminal base rate¹¹

THREE-YEAR KTB YIELD3.877%Oct. 19 · Up 2.3bp on the day87.7bp above the base rate (Snowshagal calculation), versus a 97bp year-to-date average^{11, 27}

Hana wrote that the three-month MSB yield's roughly 20bp premium to the base rate 'reflects close to an 80% probability of a hold in October and a hike in November.' It did not provide the formula.⁸ Its own chart shows the spread above 25bp immediately before the July hike and around 10bp ahead of the August hike (values read from the chart).⁸ A higher yield spread does not translate one-for-one into an actual rate increase.

Converting that spread into a probability requires assumptions: how many days the higher policy rate would apply before the bond matures, the normal spread when no hike is expected, and the chances of changes at other meetings. A three-month yield also embeds maturity and liquidity premiums. The calculation below does not attempt to reconstruct Hana's methodology; it illustrates how different assumptions change the result.

Why a 20bp Spread Alone Cannot Establish the Probability of a November Hike · Snowshagal calculationAssumed normal spreads produce values ranging from 36% to above 100%

Suppose an MSB is bought on October 16 and matures 91 days later, on January 15, 2027. A 25bp hike on November 26 would affect only the last 50 of those 91 days, lifting the average base rate over the holding period by 25 × 50 ÷ 91 ≈ 13.7bp. Under this simplified model, the implied probability of a November hike is the observed 20bp spread less the normal spread (s), divided by 13.7bp.

The Same 20bp Spread Gives Very Different Results Depending on the Assumed Normal Spread

Model output = (20 − s) ÷ 13.7 · s is the normal three-month MSB–base-rate spread absent any hike expectation

Simplifying assumptions: overnight call rate equals the base rate; no effect from a January 2027 meeting or changing maturity premiums; zero probability of an October hike. Dashed bars above 100% do not represent probabilities; they indicate that the assumptions cannot explain the observed yield. Calculations: Snowshagal.

The positioning data also need care. Hanwha estimates that foreign investors' net purchases of three-year KTB futures last week offset roughly 82% of their cumulative 78,000-contract net sales from the August 27 hike through October 8. Hanwha also notes that total open interest in those futures fell 5.4% from October 8, suggesting limited new long positioning.¹¹ But open interest is a market-wide measure, while the 82% figure simply nets flows over a specified period. Neither establishes the outstanding size of foreigners' actual short positions. It would therefore be wrong to infer that only 14,000 contracts of buying capacity remain. Hanwha expects foreign buying to fade and yields to rebound if the BOK renews its tightening signal. The three-year KTB yield rose 2.3bp to 3.877% on October 19.²⁷

BANKS · NET INTEREST MARGINS

Why Are Bank NIMs Falling During a Hiking Cycle?

Higher rates are usually considered good for banks. Yet many forecasts show net interest margins (NIMs) declining in the third quarter, despite two BOK hikes in July and August. All three brokerages surveyed expect a decline.

FIGURE 2

All Three Brokerages Forecast Lower Q3 NIMs; Industrial Bank of Korea Is the Exception

Estimated quarter-on-quarter change in bank NIM (basis points) · Brokerage coverage and definitions differ

SK reports a bank-universe average; Yuanta reports a range for banks it covers; Hana reports both an average and bank-specific estimates (Woori and JB as low as −7bp; Industrial Bank of Korea +2bp). Hana estimates that NIM in September alone ran another 2–3bp below August, based on channel checks. Sources: SK Securities (Oct. 7), Yuanta Securities (Oct. 7), Hana Securities (Oct. 12). Graphic: Snowshagal.^{28, 29, 30}

Ordinarily, margins improve first when rates rise. SK Securities reports that, as of July, floating-rate loans accounted for 70.5% of outstanding corporate loans and 56.7% of household loans. Loan rates typically reprice every three to six months, while rates on existing time deposits remain fixed until maturity and follow with a nine-to-twelve-month lag.²⁸ That timing describes repricing under existing contracts. Even if a customer's time-deposit rate stays fixed to maturity, replacing departing low-cost deposits with newly issued time deposits or bank bonds immediately raises the average funding cost. The explanation for this cycle is that a shift in funding mix arrived before loan repricing could catch up.

ON THE ASSET SIDE

Rate resets on floating-rate loans

3–6 months

0612 MONTHS

Linked to COFIX and bank-bond yields · July/August hikes feed through more fully from Q4 (SK Securities)²⁸

ON THE FUNDING SIDE

Rate resets on existing time deposits

9–12 months

Replacement of lost low-cost deposits with new time deposits and bank bonds

Immediately

0612 MONTHS

This time, the lower track moved first: average funding costs rose ahead of loan yields (SK Securities)²⁸

The funding mix explains the Q3 squeeze. SK Securities argues that money moving into equities during Q2 depleted banks' core deposits, forcing them to replace that funding with time deposits and bank bonds. Banks issued roughly ₩12tn of bonds in July–August, while the yield on one-year AAA bank bonds rose from 3.743% at end-June to 4.071% on September 21.²⁸ Hana estimates that September's monthly NIM slipped a further 2–3bp from August. It expects only Industrial Bank of Korea to report a Q3 NIM increase. Unlike commercial banks, IBK is exempt from the loan-to-deposit ratio requirement and has less reason to compete aggressively for replacement deposits through high-rate promotions.³⁰

A new risk hangs over the hoped-for Q4 rebound. Following a series of cyberattacks on financial institutions in early October, demand deposits at the five largest banks fell by nearly ₩16tn in three business days. But the media reports summarized by Hana also note that demand deposits are typically volatile at the beginning of a month as payroll and corporate funds move, while money has also been shifting into equities and higher-yielding products. Not all the outflow can therefore be attributed to the attacks.³⁰ Banks have lifted three-month deposit rates into the 3% range and launched promotional offers paying as much as 4%.³¹ These changes occurred after Q3 ended, so they cannot explain that quarter's NIM decline. They could, however, push Q4 funding costs higher.

That makes the projected Q4 rebound conditional. SK expects Q3 to mark the trough, with loan repricing lifting NIM from Q4 and, if there is one more hike in H1 next year, through at least that period. Yuanta expects a modest recovery as Q4 funding competition eases. Hana sees the question as whether the inflection comes in Q4 or Q1.^{28, 29, 31} As SK puts it, even at the same rate level in the 3% range, '3% on the way up and 3% on the way down can have very different implications for NIM.'²⁸ Even if the next hike is delayed, the loan-repricing effect of July and August remains in the pipeline. The size and duration of any NIM improvement, however, depend on the subsequent rate path and competition for funding.

Bank stocks were telling a different story from the broader market. During the KOSPI's 14.5% loss over October 12–16, bank shares fell just 2.9%. Hana sees defensive appeal in that outperformance, but cautions that a prolonged market downturn could still compress bank valuation multiples.³¹ Looking at banks only as beneficiaries of higher rates misses half the picture. According to reports compiled by Hana, Korean banks had ₩165tn of outstanding mortgages due for interest-rate resets in Q4, ₩21tn more than in Q3.³⁰ Higher rates also raise borrowers' debt-service burdens. Alongside NIM, investors need to monitor credit costs, capital ratios, and capacity for shareholder returns.

COUNTERARGUMENT · THE WON

Could a Stronger Won Push the Next Hike Back?

The strongest counterargument to the prevailing hold-in-October, hike-in-November view is the currency. A stronger won reduces import-price pressure and gives the BOK less reason to rush.

FIGURE 3

Two Months After the August Hike: KOSPI Down 21.6% From Its Peak, USD/KRW Near 1,330

KOSPI (top) and USD/KRW (bottom) · Aug. 24–Oct. 19, 2026 · Vertical markers: Aug. 27 hike, Sept. 23 peak, Oct. 15 low, and Oct. 22 Board meeting

Snowshagal market records: regular-session KOSPI closing prices; USD/KRW snapshots taken around the market close, which may differ from the official Seoul FX-market close. Records unavailable for Sept. 14, 16, 18, and 22. Oct. 16 KOSPI (5,668.05) derived from the Oct. 19 closing-price report and reported point change. Graphic: Snowshagal.^{6, 7}

USD/KRW touched a new year-to-date low intraday on October 16 and stood at 1,331.4 at the 3:30 p.m. reference close. On October 19, onshore daytime trading ended at 1,330.3, the lowest since October 2, 2024.^{7, 32} According to iM Securities' calculations, the won depreciated 7.6% in the first half but appreciated 13.8% in the second half through October 12.³³ The currency strengthened even as foreign investors sold Korean equities heavily last week. Hanwha speculates that some proceeds from equity sales may have shifted into won-denominated bonds.¹¹

There are disinflationary forces on the price side, too. Assuming Dubai crude averages $80 a barrel, Hanwha estimates that petroleum products' contribution to headline CPI inflation will decline from 1.0 percentage point in October to 0.2 point in December, then run at 0.2–0.3 point in January–February 2027. It expects oil to exert upward pressure on inflation through Q1, then to contribute to disinflation through base effects.¹² In September, headline CPI rose 2.9% year on year; petroleum products were up 14.8%.⁵ Won strength and the declining year-end contribution from fuel could justify delaying the next hike. Skipping November in favor of January or February would not necessarily conflict with the August dot plot's median of 3.25% six months ahead.

FIGURE 4

Petroleum Products' CPI Contribution Is Forecast to Fall From 1.0pp in October to 0.2pp by Year-End

Contribution to headline CPI inflation (percentage points) · Hanwha estimates · Dubai crude assumed at $80/bbl from November through H1 2027

No November estimate is given in the source. Forecasts, not reported outcomes. Hanwha expects oil to push inflation higher through Q1, then lower year-on-year inflation through base effects. Source: Hanwha Investment & Securities, 2027 Annual Outlook, p. 43. Graphic: Snowshagal.¹²

Two Distinctions That Matter in Assessing the Counterargument

GOVERNOR · IMF DISCUSSION, OCT. 13Welcoming Won Strength Is Not the Same as Calling for Another Hike

'There is room for the won to appreciate further, and further appreciation would be desirable.' At the same discussion, the governor said policy would remain restrictive until he was confident inflation would converge to target. He expected both headline and core inflation to stay above 2% for some time.³⁴ Maintaining a restrictive stance can mean keeping the current rate unchanged. If won strength brings down import prices, it can reinforce earlier hikes and reduce the urgency of another increase.

HANWHA · 2027 OUTLOOK'No Reason to Cut' Is an Argument Against Easing, Not Proof of an Immediate Hike

Although Hanwha forecasts hikes in November and February, it argues that any negative oil contribution after Q1 would be 'entirely a base effect.' With inflation expectations in the mid-to-high 2% range, a positive output gap through 2027, apartment prices, and the Korea–U.S. rate differential, it sees 'no reason to cut rates whatsoever.'¹² But not cutting and hiking at the next meeting are two different decisions.

The BOK operates its inflation-targeting framework over a medium-term horizon.³⁵ If a decline in oil's contribution is reasonably foreseeable, the Board can incorporate it before the official data arrive. It may also choose to wait longer for the effects of earlier hikes without significantly revising its forecasts. Whether a temporary headline slowdown alone would justify that choice is another matter. In November, the issues will be whether core inflation and inflation expectations also ease, won strength persists, and the BOK can afford more time to assess its two recent hikes.

CHECKLIST · OCTOBER 22

Four Things to Watch Beyond the Hold

A hold is the shared forecast across the current brokerage previews. The market reaction may depend less on the decision itself than on how the implied path thereafter differs from expectations. On August 27, the BOK hiked, yet the three-year KTB yield closed 6.1bp lower at 3.755%. It had initially jumped roughly 8bp after the decision, then reversed as investors digested the statement and press conference.³⁶ Markets trade not only the decision on the day, but also the size and pace of the tightening still ahead. Four signals will matter.

How Many Members Dissent in Favor of a Hike?
No hike dissents would match Hana's forecast (Eugene also sees the probability as low). One would align with Kiwoom and Hanwha. Kiwoom calls a dissent for a hike 'a policy signal foreshadowing the resumption of rate increases in November.' But if the market already expects one such dissent, it carries little new information on its own. In August, the dissent was in the opposite direction: Hwang Keon-il voted to hold.^{3, 10}
Does the Final Paragraph of the Policy Statement Change?
The August statement said the BOK would 'determine the timing and pace of additional increases' in the base rate.³ Watch whether that formulation remains, and whether financial-market volatility or equity prices enter the list of risks the Board is monitoring.
How Does the Governor Describe the Path Ahead?
There is no new dot plot at the October meeting. The BOK publishes it alongside its economic projections in February, May, August, and November.¹⁵ At the press conference, listen for whether the governor retains August's 'one more hike' assessment, how he applies July's distinction between semiconductor stock prices and chip prices, what he says about the stronger won, and whether he signals a revision to November's inflation projections. Changes in the distribution of members' dots will become visible in November.^{14, 21, 34}
Which Part of the Curve Gets Repriced?
Assess whether the statement and press conference raise or lower the expected path of further hikes relative to what was priced before the release. Then watch how that surprise is distributed across the three-month MSB spread (about 20bp), six-month OIS (3.30%), and 1y1y OIS forward rate (3.715%). Near-term and longer-term expectations can move independently. A hawkish tone does not require yields to rise at every maturity.^{8, 11}

How to Read the OutcomesScenario guide · Not probabilities · Compare the announcement with prior expectations, not just the day's direction in yields
OCTOBER 22 OUTCOME	KEY QUESTION	MARKET RESPONSE · FOLLOW-UP
Hold · Dissent for a hike	Was a dissent already priced in, and did the path guidance also become more hawkish?	On the day: three-month MSB spread and six-month OIS · In November: inflation path in economic forecasts
Unanimous hold · Further-hike language retained	Does it add anything about the timing, or merely confirm what investors expected?	On the day: six-month OIS · In November: forecasts and dot-plot distribution
Hold · Softer path guidance	Just slower timing, or a reduction in the expected total number of hikes?	On the day: 1y1y forward rate · Thereafter: revisions to bank NIM forecasts
Unexpected hike	Was the November hike simply brought forward, or has the total expected tightening increased?	On the day: divergence between short-end yields and forwards · In November: whether the upper end of the dot plot shifts higher

KNOWN

Base rate: 3.00% · Hikes on July 16 and Aug. 27 · August vote: 6–1
KOSPI opened −4.45% on July 16; sell-side program-trading curb; closed −6.37%
Three-year KTB yield on Aug. 27 hike day: −6.1bp to 3.755%
August dot-plot median: 3.25% (16 of 21 dots above 3.00%)
September headline/core CPI: 2.9%/2.8%
KOSPI: Sept. 23 7,080.92 → Oct. 15 5,554.22 → Oct. 19 5,768.01
USD/KRW onshore daytime close Oct. 19: 1,330.3 · Three-year KTB yield Oct. 19: 3.877%
Oct. 12–16: six-month OIS 3.30%; 1y1y forward −26bp (Hanwha figures)
Governor's remarks: July 16 (equities vs. chip prices), Oct. 12 (inflation), Oct. 13 (won strength)

ESTIMATE

Four explicit October hold/dissent forecasts and tightening paths from annual outlooks
Hana's 'nearly 80%' implied November hike probability (formula not disclosed)
Assumption-based calculations translating a 20bp spread into model outputs (Snowshagal)
Hanwha's interpretation of foreign futures buying as short-covering (actual short positions unverified)
Forecast Q3 bank NIM decline and Q4/Q1 rebound (SK, Yuanta, Hana)
Petroleum CPI contribution: Oct. 1.0pp → Dec. 0.2pp (Hanwha; $80/bbl assumption)

UNKNOWN

Oct. 22 dissent count, statement wording, and governor's path guidance
How much hawkishness the market had already priced in
Inflation/growth paths and dot-plot distribution in November's economic forecasts
Whether core inflation and inflation expectations follow the stronger won downward
Whether the equity rout spills over into consumption or credit conditions
Actual Q3 bank NIMs and Q4 funding costs

Delaying a November hike and lowering the ultimate level of rates have different implications for bonds and bank shares. If the timing alone slips, nearer-dated instruments such as six-month OIS may adjust first, while the loan-repricing effects of July and August remain intact. If the total tightening expected also falls, longer-dated instruments such as the 1y1y forward may decline further—and the magnitude and duration of bank NIM improvement may narrow. On October 22, the more revealing signal may be which part of the yield curve reprices after the announcement, rather than the words of the decision alone.

A review of public forecasts and market pricing ahead of the October 22 Monetary Policy Board meeting · Not a prediction of the decision or a trading recommendation · Sources, observation dates, and calculations below

GLOSSARY · KEY TERMS

BOK DOT PLOT: A chart in which each of the seven Monetary Policy Board members assigns three dots to reflect their own probability distribution for the base rate six months ahead. First released in February 2026; published at the February, May, August, and November economic-projection meetings. These are conditional forecasts, not policy commitments.
DISSENTING VOTE: A Board member's position that differs from the majority decision. The policy statement identifies the dissenting member and their preferred rate.
MONETARY STABILIZATION BOND (MSB): Debt issued by the Bank of Korea for liquidity management. Its three-month yield is sensitive to expected policy rates over the coming quarter.
OIS: A contract exchanging a floating overnight rate for a fixed rate over a set term. Six-month OIS broadly reflects the expected average short-term policy rate over that period.
ONE-YEAR FORWARD RATE ONE YEAR AHEAD (1Y1Y): A one-year interest rate beginning one year from now, derived from the yield curve (the values in this article use Hanwha's OIS-based series). It contains both expectations of future policy rates and term premiums; it is not equivalent to a forecast of the terminal base rate.
SHORT COVERING: Closing a short position by buying back a previously sold contract. Aggregate net buying can include both short covering and new longs, which cannot be separately identified from net-flow figures alone.
NIM: Net interest margin: net interest income as a share of interest-earning assets.
REPRICING: The resetting of interest rates on existing loan or deposit contracts in response to market benchmarks, distinct from the cost of newly raised funding.
LOAN-TO-DEPOSIT RATIO RULE: A regulatory ceiling on loans relative to deposits. When deposits leave, banks may have to attract replacement deposits to maintain lending volumes.
SELL-SIDE PROGRAM-TRADING CURB ('SIDECAR'): A five-minute suspension of program-trading sell quotations triggered when KOSPI 200 futures decline at least 5% from the previous day for more than one minute.
BASE EFFECT: A mechanical change in the year-on-year growth rate caused by unusually high or low prices in the comparison period a year earlier.
OUTPUT GAP: The difference between actual and potential GDP, expressed as a percentage of potential output. A positive gap can indicate demand-driven inflation pressure.

SOURCES · DATES · METHODOLOGY

PUBLICATION October 20, 2026 (draft) · INFORMATION CUTOFF October 19, 2026, Korean market close · Brokerage research dated October 7–19

OBSERVATION DATES	Base rate and vote: Aug. 27 · July 16 intraday equity plunge: 9:36 a.m. news report, with the close from that day's end-of-day report · Aug. 27 KTB reaction: same-day market-close report · Dot plot: Aug. 27, compared with May · September CPI: published Oct. 2 · KOSPI: Sept. 23, Oct. 15, Oct. 19 · USD/KRW: Oct. 16 (3:30 p.m.) and Oct. 19 (onshore daytime close) · Three-year KTB: Oct. 19 · OIS, forwards, futures positioning: Oct. 12–16 (Hanwha, Oct. 19) · Three-month MSB spread: around Oct. 16 (Hana chart; exact date not given) · 91-day CD and one-year MSB: Oct. 16 · Bank NIM forecasts: Oct. 7–19 · Early-October exports: released Oct. 12
SNOWSHAGAL CALCULATIONS	KOSPI drawdown: 5,554.22 ÷ 7,080.92 − 1 ≈ −21.6% · Three-year KTB spread to base rate: 3.877 − 3.00 = 87.7bp · Model outputs for the MSB spread: 91 days from Oct. 16 to Jan. 15, 2027, including 50 days after the Nov. 26 meeting; 25 × 50 ÷ 91 ≈ 13.7bp; output = (20 − s) ÷ 13.7. Assuming s = 0, 5, 9, 10, 15bp gives 146%, 109%, 80%, 73%, 36%, respectively (values above 100% are not probabilities; chart figures rounded) · Oct. 16 KOSPI: 5,768.01 − 99.96 = 5,668.05 · End-July USD/KRW 1,443.97 minus Oct. 19 1,330.3 = ₩113.7 · July drawdown: 5,593.56 ÷ 7,284.41 − 1 ≈ −23.2% · July 31 rebound: 6,595.45 ÷ 5,593.56 − 1 ≈ +17.9% · Aug. 27 KOSPI versus July trough: 6,912.37 ÷ 5,593.56 − 1 ≈ +23.6%
INDICATOR DEFINITIONS	The 1y1y forward and six-month OIS use OIS-based series from Hanwha's FI Weekly. The July-period change in 1y1y is absent from the original and therefore not compared. The 82% foreign-futures figure is Hanwha's calculation, netting purchases during Oct. 12–16 against cumulative net sales from Aug. 27 to Oct. 8.
CHART READINGS	Hana chart 7 (three-month MSB minus base rate): more than 25bp immediately before the July hike, around 10bp before the August hike, and roughly 20bp most recently (consistent with the report text).
SOURCE DISCREPANCIES	For Oct. 16 USD/KRW, SBS Biz reports 1,331.4 at the 3:30 p.m. reference close, while Hana's weekly closing figure is 1,336.5 (different observation times). Figure 3 uses Snowshagal USD/KRW snapshots (1,331.3 on Oct. 19), rather than the onshore daytime closing quote of 1,330.3. The July calendar-month KOSPI decline was −22.2% (June 30: 8,476.48 → July 31: 6,595.45), versus −23.2% for July 15–30; the periods differ. Hanwha FI Weekly reports selloff-day returns of −5.6% (Oct. 13) and −7.9% (Oct. 15), compared with commonly reported −5.46% and −7.57%. Estimates of foreigners' KOSPI net selling last week also differ: ₩11.2tn at Hanwha versus ₩13.3tn at Hana (the article uses Hanwha's figure).
FORECASTS & INTERPRETATIONS	Brokerage October/November calls and terminal rates are each firm's forecasts. Hana's 80% probability lacks a disclosed formula. Bank NIM estimates use different bank samples and methodologies. Petroleum contributions to CPI are Hanwha estimates assuming $80/bbl. Kiwoom refers to further hikes both 'by Q1 2027' and 'through H1 next year.' The exact July 16 rate-announcement time could not be verified in the source; a 9:36 a.m. report describes the decision as still pending, so this article says the selloff began before the decision. The BOK had not yet published its 2027 meeting calendar.

Bank of Korea · 'Meeting Dates' (English) · 2026 rate-setting meetings: Jan. 15, Feb. 26, Apr. 10, May 28, July 16, Aug. 27, Oct. 22, Nov. 26 · 2027 calendar not yet posted · bok.or.kr
The Fact · 'BOK Raises Base Rate to 3.00%, Back-to-Back Hikes' · Aug. 27, 2026 · July 16: 2.50% → 2.75% (first hike since January 2023); Aug. 27: 2.75% → 3.00% · news.tf.co.kr
Bank of Korea · 'Monetary Policy Decision (August 27, 2026)' · 2.75% → 3.00% · bok.or.kr · The English Monetary Policy Decision confirms that member Hwang Keon-il favored holding at 2.75%, equities had plunged particularly in semiconductors before recovering somewhat, and the BOK would determine the timing and pace of further increases · bok.or.kr/eng · Korean-language statement wording cross-checked against the full text reproduced by iNews24: Hwang's preference to keep the rate at 2.75%, the timing and pace of further increases, and the partial rebound following a semiconductor-led plunge · inews24.com
Aju Economy · 'More Hikes After Back-to-Back Moves: 16 of 21 Dots at 3.25% or Higher' · Aug. 27, 2026 · Seven members × three dots = 21 · August: 3.50% (6), 3.25% (10), 3.00% (5) · May: 3.25% (2), 3.00% (10), 2.75% (7), 2.50% (2) · ajunews.com · See also Digital Times reporting on the six-month rate outlook published the same day · dt.co.kr
Ministry of Data and Statistics · 'Consumer Price Index, September 2026' · Oct. 2, 2026 · Headline CPI +2.9% year on year; CPI excluding food and energy +2.8% · Republished by the KDI Economic Information and Education Center · Petroleum products +14.8% and August headline CPI +3.1% cross-checked against Kyunghyang Shinmun · khan.co.kr
Snowshagal market records (Npay regular-session index snapshots) · KOSPI Aug. 27: 6,912.37; Sept. 23: 7,080.92; Oct. 15: 5,554.22 · USD/KRW snapshots taken around market close
NewsPim · 'KOSPI Erases Early 3% Drop to Close Up 1.8% as Foreign Selling Eases' · Oct. 19, 2026 · KOSPI 5,768.01 (+99.96, +1.76%) · Onshore USD/KRW daytime close 1,330.30, lowest since Oct. 2, 2024 · newspim.com
Hana Securities · Park Jun-woo · 'October MPB Preview: Slower Pace ≠ End of Hikes' (Hana Fixed Income) · Oct. 16, 2026 · p. 1: unanimous hold, hawkish statement and press conference · p. 2: three-month MSB about 20bp above base rate, interpreted as nearly 80% probability of October hold/November hike (formula not stated); benchmark of roughly an 8% S&P 500 correction for assessing a sustained downtrend in yields · Chart 1: hikes in November and February, terminal rate 3.50% · p. 4, Chart 7: three-month MSB minus base rate
Eugene Investment & Securities · Kim Ji-na · 'October MPB Preview: A Pause' (FI Weekly) · Oct. 19, 2026 · p. 1: hold, low probability of a dissent for a hike, expected signal for November, limited impact of stock losses on the BOK's stance (focus on the semiconductor cycle, exports, and real-economy data rather than chipmakers' shares; relatively weak Korean equity-wealth effect on consumption) · p. 2: chart of members' conditional six-month base-rate projections
Kiwoom Securities · Ahn Ye-ha · 'October MPB Preview: Slower Pace, Tightening Not Over' · Oct. 19, 2026 · p. 1: hold with one dissent for a hike; September exports +83.5%, semiconductor exports $60.3bn; September CPI 2.9% headline/2.8% core; volatility as grounds for holding; hike dissent as a 'policy signal foreshadowing hikes resuming in November' · p. 2: additional tightening 'by Q1 2027' and also 'through H1 next year' following the November hike
Hanwha Investment & Securities · Kim Seong-su and Han Si-hwa · 'FI Weekly: When Yields Rise Again' · Oct. 19, 2026 · pp. 1–2: three-year KTB at 3.85% on Oct. 16; 1y1y forward 3.973% → 3.715%; six-month OIS little changed at 3.30%; six-month OIS +5.5bp during July rout (KOSPI −23.2% July 15–30); foreign net buying of 34,789 three-year KTB futures on Oct. 12, largest since 2005; despite ₩11.2tn foreign KOSPI net selling Oct. 12–16, USD/KRW 1,338.5 → 1,331.4 ('equity-sale proceeds may have flowed into won bonds') · p. 4: 1y1y OIS chart · p. 3: 82% of 78,000-contract net KTB futures selling from Aug. 27 to Oct. 8 offset by later buying; roughly 14,000 contracts net balance; open interest down 5.4% from Oct. 8; three-year KTB–base-rate spread 85bp vs. 97bp year-to-date average and 112bp Sept. 28; hawkish hold with one hike dissent
Hanwha Investment & Securities Research Center · '2027 Annual Outlook: Silver Lining' · Oct. 19, 2026 · p. 43: oil pushes inflation higher through Q1, then eases it through base effects; with Dubai crude at $80/bbl from November through H1 2027, petroleum's CPI contribution falls from 1.0pp in October to 0.2pp in December and 0.2–0.3pp in Jan.–Feb. 2027 · p. 44: terminal base rate 3.50%; hikes in November 2026 and February 2027, followed by a hold through year-end; any negative oil contribution after Q1 is 'only a base effect'; 'no reason to cut rates whatsoever'
iM Securities · Kim Myung-sil · '2027 Bond Outlook: Negative × Negative = Positive' · Oct. 19, 2026 · Interest-rate forecast table: Korean base rate 3.25% in Q4 2026 → 3.50% in Q1–Q4 2027 · Upside risk to the base rate at 3.75%
MTN (MoneyToday Broadcasting) · 'Governor Shin Signals Further Hikes to Tame Inflation' · Aug. 27, 2026 · Governor: 'The dot-plot median of 3.25% suggests one more hike from here, but after two hikes we need to assess their effects'; he expects a 'gradual pace of tightening' · news.mtn.co.kr
Herald Economy · 'BOK Unveils Korea-Style Dot Plot for First Time' · Feb. 2026 · Projection horizon extended from three months to six; each member submits three dots reflecting a probability distribution; issued at the February, May, August, and November economic-projection meetings · heraldk.com
MoneyToday · 'Another Sell-Side Trading Curb as KOSPI Falls Below 7,000 Ahead of a Rate Decision' · July 16, 2026, 9:36 a.m. · KOSPI opened down 323.91 points (4.45%) at 6,960.50 · Sell-side curb around 9:10 a.m. after KOSPI 200 futures fell at least 5% for over a minute · Report states the BOK rate decision was still ahead that morning · mt.co.kr
Sidae (Donghaeng Media) · 'KOSPI Surrenders 463.81 Points a Day After a 428-Point Gain' · July 16, 2026, 3:46 p.m. · KOSPI 6,820.60 (−463.81, −6.37%) · sidae.com
Asia Economy · 'KOSPI Closes at 7,284.41, Up 427.58 Points (6.24%)' · July 15, 2026 · asiae.co.kr
Kyunghyang Shinmun · July 30, 2026 closing-market report · KOSPI 5,593.56 (−69.68, −1.23%) · khan.co.kr
StockHub · 'Korea Market Close: KOSPI 6,595.45, +17.91%' · July 31, 2026, as of 3:41 p.m. · stockhub.kr · End-July closing level agrees with the monthly-index report cited below
NewsPim · 'Governor Shin Disputes Claim That Rate Hikes Caused Equity Losses' · July 16, 2026 · Governor: 'I do not fully agree that higher rates caused stocks to fall'; 'It may be better to watch semiconductor prices rather than semiconductor companies' shares'; 'We should pay attention to semiconductor prices when setting monetary policy as well' · newspim.com
Hana Securities · Kim Rok-ho · 'DRAM Price Forecasts Raised as Fear Peaks' (Semiconductors and Components Weekly) · Oct. 19, 2026 · Q3 DRAM prices better than expected; larger Q4 price increases than previously forecast; Korean memory stocks back near late-June lows
Korea Customs Service · 'Preliminary Import and Export Data, October 1–10, 2026' · Oct. 12, 2026 · Exports $26.1bn (+102.0%); semiconductors +170.9%, a record for the period · Republished by the KDI Economic Information and Education Center · Semiconductor export value $12.2bn; 5.5 working days versus 3.5 a year ago; average daily exports +28.5%, cross-checked against SBS Biz · biz.sbs.co.kr
Global Economic · 'Governor Shin Tells Parliamentary Audit Inflation Is Key to Further Hikes' · Oct. 12, 2026 · Asked whether a hike would come in October or November, he replied, 'The most important factor is the inflation trend' · g-enews.com · See also same-day iNews24 report quoting the governor: 'I think we have bought some time' · inews24.com
'Governor Shin: All Policy Options Remain Open' (republished by Daum) · July 16, 2026 · 'Unlike debt, equities have relatively few channels to systemic risk'; 'Recent volatility has been high, but its effect on the real economy remains limited' · v.daum.net
'Key Economic Indicator Changes in July 2026: KOSPI Falls 22% for the Month' (republished by Daum) · KOSPI June 30: 8,476.48 → July 31: 6,595.45 (−22.19%) · USD/KRW July 31: 1,443.97 · v.daum.net
Special Times · 'Korean Government Bond Yields Rise Ahead of MPB Meeting; Three-Year at 3.877%' · Oct. 19, 2026 · One-year KTB 3.698%; three-year 3.877% (+2.3bp); five-year 4.014%; ten-year 4.205% · specialtimes.co.kr
SK Securities · Jang Young-im · 'A Breather May Be Your Chance to Buy' (Banks) · Oct. 7, 2026 · p. 3: Q3 NIM −1.6bp, recovery from Q4 on asset repricing, one more expected hike in H1 2027 · p. 13: floating-rate loan shares (July 2026 balances) 70.5% corporate/56.7% household, loan repricing in 3–6 months versus deposits in 9–12 months; '3% in an uptrend and 3% in a downtrend have different effects on NIM' · pp. 17–20: Q2 deposit outflows and pre-funding; about ₩12tn bank-bond issuance in July–August; AAA one-year bank-bond yield from 3.743% end-June to 4.071% Sept. 21
Yuanta Securities · 'Q3 2026 Preview: Banks Remain Favored in a Hiking Cycle' · Oct. 7, 2026 · Forecast Q3 NIM down 2–4bp as funding costs outpace loan yields and time deposits replace core deposits; modest Q4 improvement expected as deposit competition eases
Hana Securities · Choi Jung-wook · 'Limited Near-Term Catalysts, but Downside Risk Contained' (Banks Weekly) · Oct. 12, 2026 · September NIM another 2–3bp below August (channel checks); Q3 bank average NIM about −4bp, Woori Financial/JB Financial as low as −7bp, Industrial Bank of Korea +2bp (LDR-rule exemption limits need for promotional deposits); demand deposits at top five banks down nearly ₩16tn in three business days after cyberattacks, with caveat about routine month-start payroll/corporate-fund movements and shifts into equities/property/high-yield products · News roundup: ₩165tn of mortgages due to reset rates in Q4, ₩21tn more than Q3
Hana Securities · Choi Jung-wook · 'Not All Outperformance Is Welcome: Market Stability Matters' (Banks Weekly) · Oct. 19, 2026 · Bank shares −2.9% on the week vs. KOSPI −14.5% · Short-term deposit rates in the 3% range; promotional offers as high as 4% · Q3 NIM turning lower; recovery expected in Q4 or Q1 · Hawkish hold forecast · USD/KRW intraday low near 1,331, weekly close 1,336.5
SBS Biz · 'USD/KRW Falls Toward 1,331, a New Year-to-Date Low and Lowest in Two Years' · Oct. 16, 2026 · 3:30 p.m. reference 1,331.4 (−13.2), new intraday annual low · biz.sbs.co.kr
iM Securities · Park Sang-hyun · 'Could Won Strength Explain the KOSPI's Divergence?' (Economy Brief) · Oct. 13, 2026 · Won −7.6% in H1, +13.8% in H2 through Oct. 12
MoneyToday · 'Governor Shin: Restrictive Policy Until Inflation Is Tamed; Further Won Strength Desirable' · Oct. 13, 2026 local time, Bangkok IMF–World Bank Annual Meetings, Governor Talk · 'Maintain a restrictive monetary-policy stance until confident inflation will converge to target in due course'; 'There is room for further won appreciation, and further strength would be desirable'; 'Headline and core inflation are likely to remain above the 2% target for some time' · mt.co.kr
Bank of Korea · 'Inflation Targeting' · Framework targets the inflation rate itself and aims to achieve its target 'over a medium-term horizon' · bok.or.kr
Financial News · 'Why Did KTB Yields Fall Across the Curve After a Hike to 3%?' · Aug. 27, 2026, 4:39 p.m. · Three-year KTB yield 3.755% (−6.1bp); ten-year 4.238% (−5.0bp) · 'Three-year yields initially jumped about 8bp immediately after the decision, then reversed as investors processed the policy statement and press conference' · fnnews.com · SBS Biz closing figures from the same day are consistent biz.sbs.co.kr

Stocks Are Tumbling.Will the BOK Still Hike?