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Bank of Korea likely to keep monetary policy accommodative, adopt wait-and-see approach

The South Korean central bank, Bank of Korea kept its key interest rates on hold at 1.25 percent on Thursday, as was widely anticipated. It has kept its rates unchanged since lowering by 25 basis points in June 2016. The economy is on a strong footing with the central bank forecasting 2.8 percent growth this year. Meanwhile, inflation is likely to be contained at 1.9 percent which is within the central bank’s target of 2 percent.

As such, there are few reasons to alter policy either way at this stage, noted Commerzbank. The persistent geopolitical uncertainties related to the North Korea missile launches are causing the Bank of Korea to be cognizant of the downside risks to confidence and growth. The other risks underlined were the rate of Fed normalization, U.S. government policies, and the protectionism. On the domestic front, elevated household debt levels continue to be a concern and would deter the central bank from cutting rates further.

“Going forward, we expect BOK to keep monetary policy accommodative and to adopt a wait-and-see approach. For USD-KRW, it is slightly higher today around 1125 on the firmer USD tone overnight”, added Commerzbank.

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November 24 15:30 UTC Released

USECRI Weekly Index*

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145.6 %

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Previous

145.6 %

November 24 14:45 UTC Released

US1st Half-Mth Infl YY*

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54.6 %

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54.6 %

November 27 09:00 UTC 29642964m

ITExport Prices*

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111 %

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ITImport Prices*

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116.1 %

November 27 14:00 UTC 32643264m

MXTrade Balance, $*

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-1.886 Bln USD

November 27 14:00 UTC 32643264m

MXTrade Balance SA*

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-1.559 Bln USD

November 27 15:30 UTC 33543354m

USDallas Fed mfg bus index

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27.6

November 27 21:00 UTC 36843684m

KRBOK Manufacturing BSI*

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87 Bln BRL

November 28 00:00 UTC 38643864m

BRCentral Govt Balance

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-22.725 Bln BRL

November 28 07:00 UTC 42844284m

DEGDP Growth QQ* Advance

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10.7 %

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