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