BoK now seen ‘on hold’ during this year – UOB

Ho Woei Chen, CFA, Economist at UOB Group, expects the Bank of Korea (BoK) to leave the policy rate unchanged throughout the current year.

Key Quotes

“Bank of Korea (BOK) left its benchmark interest rate unchanged at a record low of 1.25% [on Friday], in line with consensus and our expectation. The rate decision was again not unanimous with 2 out of 7 board members supporting a rate cut. Despite having one more dissenting member this month, BOK’s assessment of economic growth has improved as it judged that “the sluggishness in the domestic economy has eased somewhat” while uncertainties remain. It said that the current growth and inflation trajectory is still in line with projections made in November.”

“The statement suggests that BOK’s monetary policy stance has turned more neutral. The central bank had cut interest rate twice in 2019, at the July and October meetings. With the stabilization in the global trade environment, the BOK is unlikely to rush into further easing.”

“Barring an unexpected downturn in growth this year, we maintain our forecast for the BOK to be on hold at 1.25% through 2020. Expected changes to the make-up of the monetary policy board in April as tenures of four members would be expiring, may have some bearing on the rate decisions going forth.”