BOK VIEW: ABN AMRO suggest that "although.....>

KOREA: BOK VIEW: ABN AMRO suggest that "although CPI inflation has picked up a

bit in the course of this year, at around 1.5% yoy it remains subdued and below

the Bank of Korea's inflation target of 2%. Core inflation (excluding food and

energy) dropped to 0.9% yoy in August, the lowest level since the Asian

financial crisis in the late 1990s. We have lowered our 2018 annual CPI

forecast, to 1.5% (from 1.8%). Given subdued inflation, signs that domestic

demand is slowing and the rise in the unemployment rate, we expect Bank of Korea

to stay on hold for the remainder of this year. Moreover, as the downward

pressure on the won has been relatively contained so far, there is no reason to

raise the policy rate from that perspective either. As we expect CPI inflation

to pick up next year (to the BoK target of around 2%), we have pencilled in two

25 bp rate hikes by the Bank of Korea in 2019 (one in Q2 and one in Q4)."