BoK expected to cut the base rate in June

The Bank of Korea (BoK) is expected to cut the base rate further to a record-low 1.50% at the Monetary Policy Committee (MPC) meeting on 11 June. Standard Chartered believes Korean policy makers are more concerned about weak growth than financial instability at this time.

Recent data deterioration - declines in April industrial production by 2.7% y/y and May exports by 10.9% - has raised calls for a boost to the economy. While concerns on rising household debt and the impending US rate hike have restrained MPC members from easing rates, the BoK will likely prioritise the recent data deterioration which signals a need to stimulate the economy. The window of opportunity for a cut is June, before the expected US rate hike in September increases the risk of capital outflows from Korea, expects Standard Chartered.