The Bank of Korea has begun publishing the median projection of its policy committee members for the benchmark interest rate six months ahead, replacing its current practice of providing quantitative guidance for a three-month period.
In a statement released on Thursday, the central bank announced that the new so-called dot plot will be published four times a year—in February, May, August, and November—concurrent with the bank's releases of its economic growth and inflation outlooks.
Under the new framework, all seven members of the Monetary Policy Board, including Governor Rhee Chang-yong, will submit their projections anonymously. Each member will provide three dots for the baseline scenario, three for the upside scenario, and three for the downside scenario, resulting in a total of 21 dots. The bank noted that the three dots submitted by any individual member may coincide at the same interest rate level or be spread across different levels.
The new model adopted by the Bank of Korea mirrors the Federal Reserve's dot plot system, which publishes anonymous interest rate forecasts from each member of the monetary policy committee. This offers a clearer view of policymakers' expectations for the future path of interest rates, beyond just the immediate policy decision.
The central bank stated that the adjustment to its policy communication method is intended to better align interest rate guidance with medium-term macroeconomic forecasts amid an increasingly complex policy environment.
The first projection under the new format, released on Thursday, indicates that the Bank of Korea expects the benchmark interest rate to be at 2.5% six months from now.
Although the bank had previously discussed this transition, the timing came as a surprise to some economists.
Bumki Son, an economist at Barclays, commented, "Today’s policy change can reasonably be interpreted as an attempt to overcome these limitations by providing guidance on the policy path for a slightly longer horizon and specifying the expected magnitude more precisely."
The six-month dot plot will not immediately replace the existing three-month guidance. For now, the Bank of Korea will continue to provide short-term conditional outlooks during policy meetings that fall outside the quarterly forecast cycle. However, these outlooks will no longer include specific numerical breakdowns, such as how many members anticipate a rate cut or no change. The bank stated that this form of communication will revert to a traditional qualitative description.
According to the statement, once the new framework is fully established, the three-month outlook will be discontinued. At that point, the six-month dot plot will become the sole structured forward guidance tool, published four times annually.
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