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In opinion of Ho Woei Chen, Economist at UOB Group, the BoK could cut its benchmark rate by 25 bps at some point b year-end.

Key Quotes

“The Bank of Korea (BOK) kept its benchmark base rate unchanged at 1.50%… after having cut the rate by 25 bps in July”¦ BOK Governor Lee Ju-yeol said the rate decision today was not unanimous as 2 out of 7 board members had called for a rate cut”.

“Given our call for more aggressive FED interest rate cut this year by another 75bps (from 25bps previously), the trade uncertainties and downside growth risk to South Korea’s economy as well as the weaker-than-expected domestic inflation, we continue to see the possibility that the BOK will cut interest rate by a further 25bps to bring the base rate to 1.25% in 4Q2019, matching the record low during June 2016-Oct 2017. The BOK has two more rate meetings this year, on 17 October and 29 November”.

“Further monetary easing will need to be carefully considered. Governor Lee said that further rate cuts will have to take into consideration of external risks and the effective limit of the cuts. He also noted that the effective lower bound for interest rate in South Korea is higher than in developed economies. He added that there is no need to revise the interest rate adjustment system of 25bps change”.

“BOK will continue to watch the US-China trade dispute, any changes in the economies and monetary policies of major countries, the trend of increase in household debt, and geopolitical risks”.