BofAML writes that "headline inflation fell...>

KOREA: BofAML writes that "headline inflation fell below our expectation, rising

just 1.5% in 2018. We observed a lack of meaningful inflationary pressure

throughout the year. In our view, muted demand-pull inflation, lowerenergy

prices, and increased share of administered prices capped overall price rise. As

we look into 2019, we expect to see more factors that will undermine

inflationary pressure. We revise down ourCPI inflation forecast to 1.5% from

1.7% for 2019, and 1.6% from 1.8% for 2020. Our view on the factors for weaker

inflation follows.

- Wider negative output gap on the back of slowing growth momentum.

- Softer domestic consumption on weaker labor market and slower retail sales.

- Neutral oil price outlook of US$70/bbl for 2019 vs US$73/bbl in 2018.

- A dovish Fed and net FX selling supportive of KRW."