BOK likely to refrain from more accomodation in Q4

The broad trend of Korea's weak external demand but stronger domestic services activity remains unchanged. The stronger pickup in Q3 GDP supported by resurgent September IP and export volume partly reflects payback for softness in Q2 (0.3% q/q sa). 

The underlying growth momentum is likely to remain weak into 2016, and for the stance of monetary policy to remain accommodative well into next year. 2016 growth forecast is unchanged at 3%.

"However, due to the growing likelihood of a US rate hike in December amid a stronger post-MERS revival in the Korean services economy, the BoK is likely to refrain from providing more accommodation in Q4". 

A 25bp policy rate cut is expected in Q1 16, during the run-up to the National Assembly elections in April. Regardless, with base case that exports (value) remain on a soft footing, it is likely that a much weaker KRW bias may be needed.