Short Comment
Today, Bank of Korea announced lowering its policy rate by 25bp to 1.5%, surprising the markets. Main consensus for the policy this time was to freeze the rate. The media and Research Analysts in sell-side industry are suggesting that the stance confirming sluggish regional economy.
Bank of Korea lowered its expectation on economic growth from 2.5% to 2.2%, and CPI from 1% to 0.7% for this year. Ju-yeol Lee, the leader of the institution, mentioned about sluggish regional macroeconomic situation and Japan-Korea trade issue. He supported recent stance of government: restructuring economy with raising income and increasing government expenses.
Even though the institution's expectation for it's economy is worse than Korean government's want, it is supporting proceeding government's fiscal-policy. Mr. Lee assumed the growth of 2.2% achieved based on supplementary budget which is making the argument in the national assembly.
The down was surprising the Media and Research Analysts, but market participants did not show exceptional response for it. The markets were showing huge volatility to theoretical direction (Bonds and Equities up, and Currency down) for a second, but KRW turned to strong side in a few minutes. USDKRW went down by 0.21%. KOSPI200 went down by 0.30%, and yield of 10year Korean Government Bond went down by 4.7bp.
In sum, we can say that the surprising down of the rate was not that surprise actually. The markets did not show the shock. However, it is making the trend of regional interest rate fast. The proceeding trend of yield of the regional bonds should be continued for a while.
Today, Bank of Korea announced lowering its policy rate by 25bp to 1.5%, surprising the markets. Main consensus for the policy this time was to freeze the rate. The media and Research Analysts in sell-side industry are suggesting that the stance confirming sluggish regional economy.
Bank of Korea lowered its expectation on economic growth from 2.5% to 2.2%, and CPI from 1% to 0.7% for this year. Ju-yeol Lee, the leader of the institution, mentioned about sluggish regional macroeconomic situation and Japan-Korea trade issue. He supported recent stance of government: restructuring economy with raising income and increasing government expenses.
Even though the institution's expectation for it's economy is worse than Korean government's want, it is supporting proceeding government's fiscal-policy. Mr. Lee assumed the growth of 2.2% achieved based on supplementary budget which is making the argument in the national assembly.
The down was surprising the Media and Research Analysts, but market participants did not show exceptional response for it. The markets were showing huge volatility to theoretical direction (Bonds and Equities up, and Currency down) for a second, but KRW turned to strong side in a few minutes. USDKRW went down by 0.21%. KOSPI200 went down by 0.30%, and yield of 10year Korean Government Bond went down by 4.7bp.
In sum, we can say that the surprising down of the rate was not that surprise actually. The markets did not show the shock. However, it is making the trend of regional interest rate fast. The proceeding trend of yield of the regional bonds should be continued for a while.