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[Exane] The Bank of Korea (BOK) raised its policy rate by 25 bp to 2.25%, after keeping a record low rate for 16 consecutive months.

The timing of the hike is somewhat earlier than what the consensus forecasted (3Q10).

Key takeaways from the statement and the press conference:

  • First, the rate hike should not be seen as the beginning of aggressive tightening. The statement notes that monetary accommodation should continue.
  • Second, BoK will not surprise the markets and will keep sending signals before further hikes. Inflation, labor markets, property markets and the global economy as key factors to consider.

Conclusion:

This is the start of a gradual and moderate withdrawal of monetary accommodation.

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
The views and opinions expressed in this article are those of the author. This does not reflect the official position of any agency, organization, employer or company. Refer to full disclaimers here.

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