Bank of Korea unlikely to change interest rate in may, likely to hike in Q3 2018
Source: FxWire Pro - Commentary / 21 May 2018 10:42:20 America/New_York
The South Korean central bank is set to meet this week for its interest rate decision. According to a DBS Bank research report, the Bank of Korea is likely to keep its key interest rate on hold at 1.5 percent. Unlike the central banks in Philippines and Indonesia, the Bank of Korea is not facing compelling pressures to hike rates to keep maintaining financial stability, said DBS Bank.
The South Korea won has stayed resilient and the rise in KTB yields has stayed moderate in the current bout of emerging market sell-off, owing to the nation’s relatively solid current account position and external debt coverage.
The challenge for the Korean central bank is the rise in inflation pressures in the midst of the current sharp rise in global oil prices.
“We expect the BOK to raise rates by 25bps in 3Q as inflation numbers exceed 1.5 percent significantly and real policy rate turns negative. This presumes that the short-term growth outlook will not be hurt seriously by trade tensions and oil price increases”, added DBS Bank.
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