By Devayani Sathyan

BENGALURU The Bank of Korea will hold its key policy rate at 3.50% when it meets on Thursday as inflation remains sticky, according to a Reuters poll which also forecast the first rate cut won't be until the third quarter of 2024.

Although the Bank of Korea (BOK) expected a brief rise in inflation in November the figure came in at nearly twice the central bank's 2.0% target.

Signs of a soft landing in Asia's fourth-largest economy, coupled with a rebound in household debt in one of the most indebted countries in the world, indicate monetary conditions need to remain tight for longer. All 36 economists in the Nov. 21-27 Reuters poll predicted the BOK would leave the base rate at 3.50% on Thursday, its last meeting of the year.

"We expect the Bank of Korea to keep its policy rate at 3.50% at its upcoming meeting. The board is also likely to retain a hawkish bias amid persistent concerns about the upside risks to inflation and household debt growth," noted Krystal Tan, economist at ANZ.

"That said, with policy rate settings already in restrictive territory, the bar for a rate hike is high, considering the risk of exacerbating financial stress."

Median forecasts showed rates staying at 3.50% until mid-2024 and the first 25 basis point rate cut in the third quarter of 2024, one quarter later than predicted in an October poll taken before the last meeting.

Since a May poll, the prediction for the first rate cut has been pushed back from the end of 2023 to the second half of 2024.

Among economists who had a long-term view 85%, or 22 of 26, predicted at least one 25 basis point rate cut by end-September while just 30% expected a cut before July.

That puts the BOK roughly in line with its Southeast Asian peers which were also expected to cut rates by end-September. [ID/INT][PH/INT]

Medians showed rates at 3.00% by the end of 2024.

"We see a high chance that this meeting is their last time making a hawkish-hold decision before shifting to dovish-hold from next year. We see the BOK turning neutral in Q1 2024, dovish in Q2 2024, and cutting in Q3 2024," noted Kathleen Oh, chief Korea economist at Morgan Stanley.

(Reporting by Devayani Sathyan; Additional reporting by Veronica Dudei Maia Khongwir; Polling by Susobhan Sarkar and Sujith Pai in Bengaluru and Jihoon Lee in Seoul; Editing by Hari Kishan, Jonathan Cable and Susan Fenton)