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POLL-Bank of Korea to keep rates steady on Friday; cut seen ahead
January 9, 2013 / 2:10 AM / 5 years ago

POLL-Bank of Korea to keep rates steady on Friday; cut seen ahead

* Seventeen of 22 analysts see rate on hold on Friday
    * Fifteen of 21 analysts see rate cut during H1
    * Rate decision due at around 0100 GMT on Jan. 11

    By Christine Kim
    SEOUL, Jan 9 (Reuters) - South Korea's central bank will
hold interest rates steady on Friday for a third straight month
but keep the door open for an additional cut to spur a still
hesitant economic recovery, a Reuters poll shows.
    In the survey, 17 out of the 22 analysts forecast the Bank
of Korea will hold the policy rate steady at 2.75
percent at its Jan. 11 meeting. The remaining five saw a cut to
2.50 percent in what would be a third reduction since July.
    Including the latter five, 15 out of the 21 analysts who
gave a prediction on future policy direction predicted it would
cut the rate at least once between January and June to support
the government's efforts to spur the economy.
    "Domestic consumption in the U.S. or China seems to have not
picked up in earnest yet and exports in South Korea are being
badly affected by the Japanese yen's weakness," said Hong
Jung-hye, a senior fixed-income analyst at Shinyoung Securities.
    "The Bank of Korea is likely to cut rates (soon) to lend
help to the new government," he added, referring to the
government of Park Geun-hye due to launch in late February.
    
    South Korea's recent data has provided a mixed picture of
where Asia's fourth-largest economy is headed, with November
industrial production rising for a third straight month but
December exports unexpectedly falling over a year before.
    Despite the hazy data, many analysts agree that the worst is
likely over, although there remains some hefty problems,
including anaemic domestic demand and heavy household debt that
could get some support from another rate cut.
    President-elect Park from the ruling conservative party has
vowed to tackle both problems when she takes office in February,
and the outgoing government now plans to frontload more than 70
percent of its annual budget in the first half of 2013.
    Meanwhile, most of the analysts in the survey said the won's
 recent appreciation against the dollar was serious enough
for the Bank of Korea to consider cutting interest rates earlier
or by more than expected before.
    "Cutting rates because of the won's level has not been heard
of in the past and it is unlikely because the won is not a major
currency," said Park Hyuck-soo, a fixed-income analyst at
Hyundai Securities.
    The won finished 2012 up 7.6 percent against the
dollar over a year earlier and has been reaching fresh
multi-month highs in the new year, setting off government
warnings of possible action to stem the won's rally.
 
    POLL RESULTS FOR BASE RATE (2.75 PERCENT AT PRESENT): 
 COMPANY                          JAN 11  NEXT MOVE  TIMING
 HSBC                             2.75    hike       Q3 2013
 Moody's Analytics                2.75    hike       H2 2013
 Taurus Investment & Securities   2.75    hike       H2 2013
 Nomura                           2.75    hold through 2013
 Daewoo Securities                2.75    hold through 2013
 Hanwha Securities                2.75    hold through 2013
 Credit Agricole                  2.75    ~
 Capital Economics                2.75    cut        ~
 Barclays Capital                 2.75    cut        After March
 Standard Chartered               2.75    cut        Q1 2013
 RBS                              2.75    cut        Q1 2013
 Korea Investment & Securities    2.75    cut        Q1 2013
 KB Investment & Securities       2.75    cut        Q1 2013
 Woori Investment & Securities    2.75    cut        Q1 2013
 IM Investment & Securities       2.75    cut        Q1 2013
 Hyundai Securities               2.75    cut        Q1 or Q2
 Shinhan Investment Corp          2.75    cut        Q1 or Q2
 Samsung Securities               2.50    cut        Q2 2013
 SK Securities                    2.50    cut        Q2 2013
 Shinyoung Securities             2.50    hold through 2013
 Hana Daetoo Securities           2.50    hold through 2013
 IBK Securities                   2.50    hold through 2013
 ~ No forecast available

 (Additional reporting by Narae Kim and Daum Kim; Editing by
Choonsik Yoo and Jacqueline Wong)

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