Chong Hoon Park, Head of Korea Economic Research at Standard Chartered, suggests that they expect the Bank of Korea (BoK) to cut the policy rate to 1.50% on 30 August in response to continued weak export performance, subdued inflation and a downgraded government GDP growth forecast.
“Exports fell 13.5% in June, versus the past-five-month average decline of 8.9%, neutralising market expectations of a recovery in H2-2019. CPI inflation fell to 0.2% m/m in June, taking the H1 average to only 0.6% y/y. Further, the government lowered its 2019 growth forecast by 0.2ppt to 2.4-2.5%, calling for more dovish monetary policy. A dissenting vote by a dovish Monetary Policy Committee (MPC) member in May and the prediction of a July rate cut by another dovish member will likely pressure other MPC members to expedite a rate cut.”