Further BoK rate cuts are not expected in 2016, as policymakers will maintain a wait-and-see stance. The ongoing recovery in domestic demand fuelled by credit expansion (especially household credit) is likely be the main reason why policymakers are hesitant about implementing additional easing. 

The underperformance of exports is unlikely to be severe enough to offset the strength in domestic demand. Persistent low inflation with a negative output gap is also unlikely to be enough to prompt a decision in favour of further easing, as most BoK officials appear to conclude that low inflation and subdued growth are a structural phenomenon that cannot be changed by monetary policy. The minutes of the recent monetary policy meetings suggest that it is difficult to find dovish members in the BoK policy committee. 

"We expect the BoK's inflation target range for 2016-2018 to be 2.0~3.0% (currently 2.5~3.5%), and policymakers are not likely to respond to any headline inflation that is slightly below this range", says Societe Generale.

Of course, the BoK could easily opt for further rate cuts to support domestic demand if downside risks such as a China hard-landing were to materialise.