MNI PREVIEW: BOK Likely To Stand Pat, But One More Cut Seen

--Bank Of Korea Set To Keep Rates At Record Low 1.25%

     TOKYO (MNI) - The Bank of Korea is expected to stand pat on monetary policy

at the November 29 meeting, but one more rate cut is expected in the current

cycle and could come at the January meeting.

     The central bank cut rates by 25bps to a record-low 1.25% in October and

Governor Lee Ju-yeol noted there was "still room for us to respond to changing

financial and economic conditions" as global uncertainties remain high despite

some signs of hope in the world economy.

     Hidehiko Mukoyama, a senior economist and South Korea watcher at the Japan

Research Institute's Economics Department, said, "One more rate cut is expected

but it is unlikely at the upcoming meeting and probably in January."

     Although the BOK is eyeing the impact of the July and October rate cuts on

the economy, there is a lingering concern that the ongoing global trade disputes

will weigh on South Korea's exports.

     Mukoyama said South Korea continues to suffer from the weak Chinese

economy.

     "South Korea's exports are expected to remain weak as the Chinese economy

lacks momentum although they are expected to pick up toward mid-2020," he said.

     --HOUSEHOLD DEBT

     The BOK is cautious about further rate cuts as it could trigger a pick-up

in household debt, leading to a higher risk of non-performing loans and

financial imbalances. Concerns over the side effects of easy policy probably

slowed the pace of easing earlier in the year, an expert in overseas economies

at a Japanese governmental entity said.

     However, a sluggish bounce back in exports will probably trigger policy

action, with the bank particularly focussed on the IT sector, as it hopes the

slide in exports may have bottomed.

     "Demand for IT-related goods will likely pick up toward 2020. When exports

of IT-related goods rebound, the favourable impact will emerge at major

manufacturers, but it will take some time for effects to filter through to

households," the source said.

     South Korea's exports fell 14.7% on year in October, an 11th straight drop.

South Korea's exports to China fell 16.9% on year in the same period. Exports of

semiconductors, which accounts for 18% of the total exports, fell 32.1% y/y.

     In its regular update on the global economic outlook released late in

October, the International Monetary Fund cut South Korea's 2019 and 2020

economic growth forecasts by 0.6 percentage points each to 2.0% and 2.2%,

respectively.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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