BoK to keep the base rate on hold throughout 2019 – Standard Chartered

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Analysts at Standard Chartered are expecting the Bank of Korea (BoK) to keep its base rate on hold throughout 2019 against their previous call, which was for a 25bps hike in Q3-2019.

Key Quotes

“The revision reflects dovish Fed comments, Korea’s weak economic growth, and downside risks from an unfriendly external environment.”

“We recently revised our Fed call and now expect only two hikes in H2-2019 (versus four previously), taking the terminal federal funds target rate to 3.0% (3.5% previously). Against this backdrop, the BoK should feel less pressure from Fed tightening, allowing it to shift its focus from containing capital outflows to boosting growth.”

“The BoK hiked the base rate to 1.75% in November as it emphasised financial stability over growth, despite the economic slowdown. Q3 GDP growth disappointed market expectations due to weak facilities and construction investment.”