The Bank of Korea falls behind the curve

Chi Lo, regional head of research & senior economist (NE Asia), Global Markets, Standard Chartered Bank, Hong Kong, discusses Bank of Korea''s reactive monetary policy.

The Bank of Korea BoK has been reactive in its monetary policy and has thus fallen behind the expectation curve. But it does not matter to Korea at this juncture, as rate cuts are not going to help boost growth and asset prices.

So do not expect the BoK to ease aggressively. Solid progress in structural reform is needed to help turn around the current economic deadlock. But political and economic constraints will hamper any significant reform progress.

This will not only hurt investor confidence in the local markets, despite ample liquidity in the system, but will also aggravate the impact of a poor global backdrop on Korea and drag down GDP...

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