South Korea: BoK seen “on hold” through 2021 – UOB

Ho Woei Chen, CFA, Economist at UOB Group reviewed the latest meeting by the Bank of Korea (BoK).

Key Quotes

“The Bank of Korea (BOK) kept its benchmark Base Rate unchanged at 0.50% today, in line with expectation. This is the fourth consecutive meeting that the BOK has stood on hold, having cut interest rate by a total of 75 bps in 1H20. BOK governor Lee Ju-yeol said that the rate decision today was unanimous and reiterated that the central bank will maintain its accommodative monetary policy stance until clearer signs of recovery, and not consider policy normalization at this stage. We maintain our call for BOK to remain on hold through 2021 to facilitate the economic recovery.”

“The central bank also released an update of its GDP and inflation forecasts for 2020-2021. The GDP forecasts for 2020 and 2021 were upgraded to -1.1% (from -1.3%) and 3.0% (from 2.8%) respectively. Inflation is expected to remain subdued with forecasts for 2020 and 2021 at 0.5% (from previous est. 0.4%) and 1.0% (unchanged from previous est.) respectively. Further out, the growth and inflation outlook for 2022 are at 2.5% and 1.5% respectively.”