BoK turns more cautious

The Bank of Korea held the policy rate at 1.5% in September, in line with expectations of 16 out of 18 economists in the Bloomberg survey including ourselves, after cutting rates in June. 

Today's decision was unanimous, an indication that the MPC members may be inclined to adopt a wait-and-see attitude ahead of the Fed FOMC decision on 17-18 September (Asia timezone). 

Meanwhile, the BoK is still assessing the impact of weaker China demand, recent heightened instability in the financial market as well as the recovery in the services sector post the MERS outbreak. 

"The comments in the statement and the tone of the governor's press conference have turned notably more cautious, as the governor highlighted increasing risks amid higher external uncertainties. This has also prompted the central bank to downgrade its external assumptions, it now expects the global economy to recover at a more moderate pace than its earlier assessment", says Barclays. 

On the domestic front, the governor acknowledged mixed indicators, with domestic activities and consumption on a recovery trend whereas exports are showing no signs of turnaround.