Money in Korea
Korea - Money
BOK stands pat in January and turns less dovish
At its 17 January monetary policy meeting, the Bank of Korea (BOK) voted to keep the base rate unchanged at 1.25%, as had been widely expected by market analysts. The decision marks the second consecutive hold after the BOK twice lowered rates in 2019.
The Bank kept its accommodative monetary stance, citing muted price pressures, sluggish global trade and geopolitical risks. Inflation accelerated to 0.7% in December from 0.2% in November, and the Bank expects it to pick up slightly this year and average roughly 1.0%. Nevertheless, inflation will likely remain below the Bank’s target rate of 2.0% for this year and 2021. Meanwhile, the domestic economy seems to be gaining some momentum, as employment levels and housing prices have increased slightly in recent months, which should be stoking household spending growth.
The BOK took a more or less neutral stance in its communiqué, and kept its inflation and economic growth outlook roughly unchanged from its previous meeting for this year. The BOK noted recent strength in the won due to optimism linked to U.S.-China trade relations and early signs of a recovery in the semiconductor industry. Moreover, trade tensions between Korea and Japan have seemingly thawed in recent weeks. These developments bode well for the external sector.
Commenting on the BOK’s tone, analysts at Goldman Sachs noted:
“On the dovish side, the number of dissenting votes has increased, whereas on the slightly hawkish side, the governor and MPC statement noted early signs of recovery in macro indicators vs. rises in household debt and housing prices […] from the overall balanced tone from the governor's press conference that the BOK will likely stay on hold for some time before the next policy rate change. We keep our view of another rate cut, most likely in July”.
The next monetary policy meeting is set for 27 February.
FocusEconomics Consensus Forecast panelists project the base rate to end 2020 at 1.13% and to end 2021 at 1.40%.
Korea - Money Data
|Money (annual variation in %)||8.1||8.2||7.1||5.1||6.7|
5 years of economic forecasts for more than 30 economic indicators.
Korea Money Chart
Source: Bank of Korea and FocusEconomics calculations.
|Bond Yield||1.68||1.55 %||Dec 31|
|Exchange Rate||1,156||0.21 %||Dec 31|
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February 13, 2020
Merchandise exports decreased 6.3% year-on-year in January, which was down from the 5.3% drop recorded in December, totaling USD 43.3 billion in January (December: USD 45.7 billion).
February 4, 2020
Consumer prices increased 0.6% over the prior month in January, stronger than December’s 0.2% increase.
February 3, 2020
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) ticked down to 49.8 in January from 50.1 in December, moving slightly below the 50-threshold that separates an improvement from a deterioration in the manufacturing sector over the previous month. January’s print was driven by a fall in employment and a virtual standstill in production levels.
January 31, 2020
Industrial production, which includes output from the mining, manufacturing, and electricity and gas sectors, surged 4.2% year-on-year in December, contrasting November’s revised 0.2% drop (previously reported: -0.3% year-on-year).
January 30, 2020
The Bank of Korea’s forward-looking business confidence indicator for manufacturers increased to 77 in February from 73 in January, while confidence in the non-manufacturing sector ticked down to 74 points in February from 75 in the month prior.