South Korean Seven-Day Repo Rate Left at Record Low of 1.75%

April 9, 2015

The decision to leave South Korean monetary policy unchanged was most likely an intentional pause rather than a signal that the easing cycle is over.  A 25-basis point cut in March had been the first change in five months and the fourth reduction since May 2013.  If Bank of Korea officials think Fed tightening will start in June, their next meeting on May 15 would be a prudent time to act.  June’s meeting is scheduled just six days before the FOMC’s, so the won would be better protecting if easing is done in May than June.  A statement released by the BOK’s Monetary Policy Committee makes a number of points consistent with additional monetary support in the future.

  • Headline and core inflation (0.4% and 2.1%) decelerated in March.
  • Korean exports continue to trend downward.
  • Unemployment has risen somewhat.
  • A negative output gap is expected to continue for a considerable time.
  • The won rose since the last meeting.
  • Staff forecasts for both growth and inflation have just been reduced for 2015 and 2016.  Inflation will be under 1.0% this year.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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