BoK likely to deliver another 25bp rate cut in Q1 16

Marked by slow inventory clearance and production lacking in slow external demand, the underlying trend remains steady. Domestic demand and services were stabilized post MERS outbreak, the still weak exports and private consumption payback are likely to slowdown pace of growth in Q4.

Bank of Korea announced an inflation target for 2016-18 as it set an explicit 2% target rate. BoK believes that this would help to communicate its policy goals with more clarity. An inflation target of 3-3.2% also reflects a lower but more volatility, given lower growth.

"We maintain our forecast that the BoK will deliver another 25bp rate cut in Q1 16, ahead of the National Assembly elections in April 2016. We also believe a weak KRW bias will resume...we believe the incoming Finance Minister could be more aggressive in targeting a weaker KRW", says Barclays in a research note.