Korea’s headline CPI has undershot the BoK’s forecast range since 2012. More recently, BoK shifted its target from 2.5% over the past two years to 1.9% for 2015. However, CPI inflationcontinues to surprise to the downside of consensus and the BoK’s target. February’s annual CPI inflation fell from 0.8% to 0.5% (consensus: 0.7%), while annual core CPI fell from 2.4% to 2.3%.Activity indicators are also lacklustre. BoK lowered this year’s growth forecast to 3.4% from 3.9%. But the weak hand off from 2014 of 2.7% suggests downside risk to this forecast.Meantime, the unemployment rate is sitting a near five-year high of 3.9%. BoK surprised consensus and cut rates by 25bps to 1.75% in March. Consensus expects this to be the bottom of the easing cycle. On the basis of this, RBC Capital Markets expects BoK to maintain an accommodative policy stance in 2015 and says cannot rule out a further cut in rates.

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