Bank of Korea remains on hold in July, gradual normalization likely in near future

As widely expected, the Bank of Korea remained on hold on Thursday; however, the market is curious to know how the central bank would comment on the current economic situation, noted Commerzbank in a research report.

Currently, the economic dynamics is definitely different from the central bank’s April assessment. The Bank of Korea has revised down its 2017 GDP growth projections to 2.8 percent from 2.6 percent, while it maintained the CPI inflation forecast at 1.9 percent. The Bank of Korea’s governor Lee stated that the revised projection has not considered the effect of extra budget, implying that there exists upside risk in GDP and inflation forecast.

“We forecast the economy will expand 2.9 percent and inflation will be 1.9 percent for the whole year”, said Commerzbank.

In all, it appears that the Bank of Korea’s accommodative monetary policy is close to an end, and a gradual normalization is likely in the near future, added Commerzbank.

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