August 28, 2019 / 4:26 AM / 3 months ago

South Korea to pause rate cuts this week but October easing seen likely: Reuters poll

SEOUL (Reuters) - South Korea’s central bank will likely keep interest rates unchanged on Friday after last month’s easing but looks certain to cut it at the next meeting as the economy cools, a Reuters survey showed.

A currency dealer looks at screens at a dealing room of a bank in Seoul February 6, 2014. REUTERS/Kim Hong-Ji

Thirteen out of the 18 analysts surveyed by Reuters saw the Bank of Korea keeping its base rate KROCRT=ECI at 1.50% this week while the remaining five forecast a cut to 1.25%, which would match a record low for the policy rate.

Including the five, a total of 15 analysts also saw a reduction by the Oct. 17 meeting. The remainder saw at least one downgrade in the rate by the November meeting, meaning all of the 18 analysts saw a cut this year.

“(South Korea’s) exports performance and the overseas situation has turned for the worse since the July rate cut and this warrants a further reduction,” said Lee Mi-seon, fixed-income analyst at Hana Financial Investment.

But she predicted a cut in October rather than this week as the Bank of Korea has never cut the rate at two meetings in a row, excluding the serious economic downturns of 2001 and 2009.

The BOK in July trimmed this year’s growth forecast for Asia’s fourth-largest economy to 2.2% from 2.5% previously, but that is still far above projections by private-sector organizations, which are as low as 1.4%.

South Korea’s trade-reliant economy faces mounting risks such as cooling global demand amid the prolonged Sino-U.S. tariff war, shrinking corporate investment and weak consumer spending.

The central bank’s latest growth projection for this year would be the weakest pace of growth since the 2008/09 global financial crisis and among the worst spells since the end of World War 2.

Apart from the central bank meeting, investors are also awaiting the release of July industrial production data on Friday, August export figures on Sunday and August consumer inflation indicators on Sept. 3.

According to Reuters polls, analysts expect a 0.5% rise in July industrial output month-on-month, a 13.6% fall in August exports year-on-year and a 0.2% gain in August consumer price index on-year.

Editing by Sam Holmes

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