Barclays: Bank of Korea May Shift Monetary Policy Framework on July 15

According to Barclays on July 15, the Bank of Korea may transition its monetary policy framework from the IMF-style Integrated Policy Framework (IPF) to the BIS-style Macro Financial Stability Framework (MFSF) under new Governor Shin Hyun-song. Under the MFSF approach, the central bank could justify rate hikes based solely on credit expansion or asset price rallies, even if inflation remains stable.

Barclays economist Son Beom-ki noted that while both frameworks share broad coordination principles between monetary, fiscal, and macroprudential policies, the MFSF places greater emphasis on financial cycles. The shift could occur as the Bank of Korea focuses on demand-side inflation from wage growth. Barclays expects rate hikes in July and October, bringing the benchmark rate to 3% (estimated neutral rate ceiling), with additional increases possible in April 2027.