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Following the release of South Korea’s headline CPI data, analysts at the Australia and New Zealand Banking Group (ANZ) came out with their research. The report signals, based on the data, that South Korea’s economy is turning a corner, but the outbreak of the coronavirus presents a new growth risk.

Key quotes

South Korea’s headline inflation accelerated in January to 1.5% y/y, the fastest pace since November 2018.

The increase mainly reflected a pick-up in food and transport inflation, while core inflation ticked up only marginally to 0.9% y/y.

Meanwhile, recent activity data suggest South Korea’s economy is turning a corner, but the outbreak of the coronavirus presents a new growth risk.

As things stand, we are maintaining our forecast for no policy rate change in 2020.

We have been of the view that the Bank of Korea (BoK) is likely to keep its policy rate on hold through 2020 unless the growth outlook deteriorates sharply.

With the coronavirus situation still very fluid, we are not inclined to change our forecast just yet. The BoK has also stated that it is premature to consider additional rate cuts at this stage.