BoK to revise its GDP and inflation forecasts

In the quarterly review of the macroeconomic outlook, the BoK is likely to introduce modest downward revisions to its GDP and inflation forecasts, with the GDP forecast potentially changing to 2.6% from 2.8% in 2015 and to 3.2% from 3.3% in 2016, to reflect a worse-thanexpected impact from MERS and a worsening global outlook. 

The headline inflation forecast could also be revised down to 0.8% from 0.9% for 2015 to reflect lower energy prices, while the 2016 forecast is likely to be left unchanged at 1.8%, says Societe Generale. The current account surplus forecasts is expected to be revised up to $110bn from $98bn in 2015 and to $100bn from $88bn in 2016, also due to lower oil prices.

The possibility of a rate cut cannot be rulled out in January 2016 along with yet another downward revision to the GDP forecasts. But the base scenario of a sustained domestic demand recovery and a gradual rebound in China's activities supports no BoK easing in early 2016, argues SocGen.