17 Feb 2015
BOK holds rates steady, might cut rates in April – Nomura
FXStreet (Barcelona) - Young Sun Kwon, Research Analyst at Nomura, explains that the Bank of Korea left rates unchanged with the central bank facing a dilemma between weaker growth and higher household debt, and further forecasts Korea to see two 25bp rate cuts in April and July.
Key Quotes
“The Bank of Korea (BOK) left the policy rate unchanged at 2.00% in February in a unanimous decision. At the post-meeting press conference, BOK Governor Lee mentioned that the BOK will wait and see whether the economy recovers in a manner consistent with its own outlook (3.4% real GDP growth and 1.9% headline CPI inflation forecast for 2015).”
“Indeed, the language in the statement about the direction of future policy was unchanged from the previous month.”
“We feel the BOK is facing a dilemma between weaker growth and higher household debt, but recent data, especially exports and corporate performance, suggest there are substantial downside risks to the BOK's seemingly optimistic economic outlook.”
“We believe the BOK will again revise down its GDP and CPI inflation forecasts markedly in April, paving the way for further monetary easing.”
“That said, the concerns of policymakers over weaker growth should eventually outweigh their concerns over household debt.”
“Therefore, we maintain our call that the BOK will cut policy rates by 25bp to 1.75% in April and further to 1.50% in July to limit the downside and deflationary risks to the economy.”
Key Quotes
“The Bank of Korea (BOK) left the policy rate unchanged at 2.00% in February in a unanimous decision. At the post-meeting press conference, BOK Governor Lee mentioned that the BOK will wait and see whether the economy recovers in a manner consistent with its own outlook (3.4% real GDP growth and 1.9% headline CPI inflation forecast for 2015).”
“Indeed, the language in the statement about the direction of future policy was unchanged from the previous month.”
“We feel the BOK is facing a dilemma between weaker growth and higher household debt, but recent data, especially exports and corporate performance, suggest there are substantial downside risks to the BOK's seemingly optimistic economic outlook.”
“We believe the BOK will again revise down its GDP and CPI inflation forecasts markedly in April, paving the way for further monetary easing.”
“That said, the concerns of policymakers over weaker growth should eventually outweigh their concerns over household debt.”
“Therefore, we maintain our call that the BOK will cut policy rates by 25bp to 1.75% in April and further to 1.50% in July to limit the downside and deflationary risks to the economy.”