Bank of Korea Raises Base Rate to 3%, Lifts Growth Forecast to 3.3%

* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and delivers six tailored news items for each reader type.

1. Base Rate at 3% Signals Tightening Cycle

- Key summary: The Bank of Korea held a Monetary Policy Board meeting on the 27th and raised the base rate by 0.25 percentage point to 3% a year. It is the first time the base rate has entered the 3% range in a year and six months, since February 2025, and the first back-to-back increase in three years and seven months, since January 2023. Bank of Korea Governor Hyun Song Shin said preemptive monetary policy action was needed to stabilize prices and the broader macroeconomy, and the central bank raised its forecast for this year's real gross domestic product growth to 3.3% from 2.6%. Board members most frequently cited 3.25% as their outlook for the base rate six months from now, however, leaving open the possibility of one more increase.

2. Nvidia's Jensen Huang Sees 70% Growth Next Year, Says Double Was Possible Without Memory Bottleneck

- Key summary: Nvidia posted record revenue of $96.22 billion (about 133.2 trillion won) and operating profit of $63.734 billion (about 88.34 trillion won) in the second quarter of fiscal 2027. The figures were up 106% and 124% from a year earlier, respectively, driven by $89 billion in data center revenue, which includes artificial intelligence chips. Chief Executive Jensen Huang said AI demand is close to 100% but that the company set next year's revenue growth at 70% based on available supply. Chief Financial Officer Colette Kress said memory shortages would act as a bottleneck to growth through the end of fiscal 2028. Nvidia's component supply commitments also more than doubled to $279 billion from $119 billion in the previous quarter.

3. Monthly Interest Alone Tops 2 Million Won on a 300 Million Won Loan as Mortgage Rates May Pass 8% This Year

- Key summary: Five-year fixed mortgage rates at South Korea's five major commercial banks stand at 4.72% to 7.17% a year, with the lower end up 0.79 to 0.94 percentage points from the end of last December. With yields on five-year bank bonds, the benchmark for fixed-rate loans, and the July COFIX, the cost of funds index used for floating-rate loans, both rising, observers say the ceiling on fixed rates could exceed 8% as early as this year. If mortgage rates top 8%, interest alone on a 300 million won loan would come to 2 million won a month, and by the central bank's estimate, a 0.50 percentage point rise in lending rates would add 3.7 trillion won to total mortgage interest costs for all borrowers. Household credit outstanding topped 2,000 trillion won for the first time at the end of June this year, while the delinquency rate on banks' won-denominated loans stood at 0.56% in June, the highest in a decade.

4. Ultra-High-Net-Worth Investors, Disappointed by Shareholder Returns, Sell More Samsung Electronics

- Key summary: Samsung Electronics was the most heavily net-sold stock among 7,500 ultra-high-net-worth investors holding at least 3 billion won in financial assets between the 1st and 24th of this month, with net sales of 91.33745 billion won. It was the top net-sold stock for a second straight month, following 75.74517 billion won last month. Samsung Electronics approved a shareholder return plan worth up to 110 trillion won on the 21st of this month, but said details beyond about 30 trillion won in cash dividends, including its regular third-quarter dividend, would be finalized at a board meeting in late October. Samsung Electronics closed at 266,000 won, up 1.72% from the previous session. Over the same period, the ultra-high-net-worth investors bought 122.11 billion won worth of SK hynix, making it their top net purchase.

5. Return of Time Deposits: Is a Reverse Money Move Underway?

- Key summary: Time deposit balances at the five major banks totaled 1,000.7071 trillion won as of the 26th, up 15.7672 trillion won from the end of last month. Compared with the end of June, the balance rose 51.3073 trillion won in less than two months, including a 35.5401 trillion won jump over the past month alone. Demand deposit balances, by contrast, fell 19.3413 trillion won to 646.5466 trillion won from 665.8879 trillion won at the end of last month, prompting analysts to say some funds parked for stock investment have moved into higher-yielding time deposits. Headline time deposit rates at the five major banks have risen to as high as 3.20% to 3.25% a year, and products offering more than 4% are not uncommon at savings banks.

6. AA- Yields Already in the Mid-4% Range as Corporate Bond Market Chill Persists

- Key summary: Yields on three-year corporate bonds rated AA- stood at 4.448% on the 27th, moving sideways in the mid-4% range. That is 20.5 basis points below this year's high of 4.653% but more than 100 basis points above the year's low of 3.418%. Inflation concerns stemming from high oil prices combined with a semiconductor market boom have pushed up government bond and market yields, and corporate bond issuance this year fell 8.8% from a year earlier to 81.3974 trillion won. Polarization by credit rating has also become pronounced, with SK ecoplant drawing nine times its target amount while BBB-rated E-Land World failed to place its entire offering.