Most global investment banks forecast South Korea's central bank to raise its key interest rate this month in a bid to rein in rising consumer prices, a report showed Monday.
According to the report by the Korea Center for International Finance, the investment banks, including Goldman Sachs, predict the Bank of Korea (BOK) will hike the benchmark seven-day repo rate at a rate-setting session scheduled for Friday in a bid to tame rising inflationary pressure.
South Korea's consumer prices grew 4.2 percent in April from a year earlier, topping the upper end of the central bank's 2-4 percent inflation target band for fourth months in a row.
According to the report, Goldman Sachs projected a 0.25-percentage point hike in May, and two further hikes in the second half of this year, citing South Korea's high inflation rate and robust exports.
Nomura expected the BOK to take baby steps and raise the base rate by 0.25 percentage points in May and July, respectively.
Deutsche Bank also forecast a rate hike this month. The German banking group, however, said the continued ascent of the South Korean won and rising household debts may lead the BOK to raise the key rate by only 0.50 percentage points this year.
Citigroup, however, said a rate hike may be delayed beyond June if the central bank puts more focus on risks such as the won's appreciation against the U.S. dollar and household debts.
The BOK has said it will "consistently" push to raise its key interest rate down the road in a bid to curb growing inflation expectations. The central bank has hiked the borrowing cost by a combined 1 percentage point since last July but froze the key interest rate at 3 percent in April, citing lingering economic uncertainties such as the fallout of Japan's devastating earthquake.