Bank of Korea stands pat, likely to hike in coming months

The South Korean central bank, Bank of Korea, stood pat this morning. But it seems that a hike in interest rate is looming on the horizon, given the rebounding economic fundamentals and gradually rising inflation, noted Commerzbank in a research report.

Amongst the seven members that voted today, one member voted for a rate hike. The Korean economy appears benign in 2017, underpinned by buoyant trade sector, and the government currently sees 3 percent growth for 2017 and 2018.

Meanwhile, inflation in South Korea is accelerating, unlike most of its Asian peers, albeit at a moderated rate. On a year-on-year basis, the consumer price inflation remained above 2 percent for most of the time in 2017, falling into the upper band of the central bank’s one percent to three percent inflation target.

Overall, it is likely that the Bank of Korea might hike its interest rate in the months ahead. The KRW remains range-traded over the past two quarters. While the economy profile continues to be good, the North Korea issue continues to cloud the economic outlook, stated Commerzbank.

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