Divyang Shah, Senior IFR Strategist
But more important is the motivation behind the easing to which:
1) a desire to support government fiscal stimulus, and
2) recent easing by other central banks.
Whether a further cut is delivered will likely depend upon whether the government delivers its fiscal stimulus on time.
On the issue of easing by other central banks remember we have seen the ECB and RBA both ease policy over last week while the BoJ delivered its bazooka in early April.
The KRW remains attractive from a carry perspective and thus a need not to stand out in the JPY carry trade crowd. At this stage it’s the growth outlook as opposed to the KRW that seems to be the main concern for the BoK.
While the governor mentioned that the exchange rate was not the key issue behind the rate decision there is the potential for this to be an issue as the impact of JPY weakness in exports was mentioned.
The BoK sees exports as having recovered even if this is at a modest pace and it would take a turnaround here for this to start having a greater weight on policy.
For now the BoK is content on smoothing KRW strength (via FX intervention) as opposed to taking significant steps.
