[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.