JPMorgan's base case calls for three more Bank of Korea hikes - November, followed by moves in February and May - taking the benchmark to 3.75 percent before this tightening phase ends. That is above the 3.5 percent median in Bloomberg's economist survey, which projects the rate will hold at that mark until the end of the second quarter of 2028. As JPMorgan economist Seok Gil Park put it, "We say 3.75%, but at this point it's far too early to definitely say where the ceiling for the terminal rate is," adding, "We're experiencing a macroeconomic shock on a scale we haven't seen before."
The firm says the chip-fueled expansion could put fresh pressure on prices, creating upside risk to its already above-consensus rate view, so long as credit and broader financial conditions remain steady.
The semiconductor upswing is already visible in business investment, helping explain JPMorgan's stronger growth profile. It sees the economy expanding 3.8 percent this year and 3.3 percent next year, versus the Bank of Korea's 3.3 percent and 2.9 percent. For the third quarter, JPMorgan estimates GDP rose about 1 percent from the prior three months with risks tilted higher, versus the central bank's roughly 0.3 percent projection.
Household demand is the swing factor. Large payouts and pay increases at semiconductor firms could spur consumption, yet the overall boost may be limited because only a small fraction of workers benefit directly. As Park noted, "When income gains are concentrated among certain groups, there's a limit to how much that can boost overall consumption - after all, people can't eat lunch three or four times a day."
The BOK implemented consecutive hikes in August after raising rates in July. Together, those actions lifted the policy rate to 3 percent, marking the first such sequence in over three years. The August minutes indicated officials were still considering additional tightening, even as they expressed differing levels of caution about how fast to proceed.
The bank's August six-month projections showed a 3.25 percent median, implying one additional quarter-point increase over that period. Officials are expected to keep settings unchanged at the Oct. 22 decision. Park ranked among the earliest economists to forecast that the BOK would lift rates in August after the July move.
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Park expects the central bank to lift its growth outlook again with November's forecast update. Before that, the October policy statement customarily details both upside and downside risks. He added that the tone could skew more hawkish if officials stress growth-upside risks in light of oil price dynamics, Federal Reserve policy, and overall economic momentum.
On inflation, JPMorgan sees a path toward the 2 percent target, but Park warns the risk is that price pressures linger for longer. He is paying closest attention to core categories - non-energy manufactured goods and services consumed by households - since their monthly increases have stayed relatively high, suggesting it's premature to say inflation is back near target. A recent rise in the won has helped ease imported inflation, and the lone dissenter in August argued that because the currency was firming, the case for keeping policy tight to offset currency weakness was less compelling.
Still, Park said more won appreciation would not automatically be dovish if improved trade pricing and gains in inflation-adjusted incomes were to fuel demand at home. "That's why a balanced approach to growth, inflation and financial stability is needed," he said.
If chip earnings ripple beyond factories into suppliers, wages and services, the BOK may have to lean tighter for longer than many expect. If the boom stays concentrated, growth can hum along with less heat on consumer prices.
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