Korea: The BOK should keep the door open to hikes – Nomura

Analysts at Nomura suggest that their Bank of Korea signal indices (NBSI and NBSI+) are positive (suggesting the likelihood of a rate hike), but they expect the BOK to leave rates unchanged at 1.50% at its 31 August meeting with one dissenting vote for a 25bp hike.

Key Quotes

“We expect the BOK to deliver a 25bp rate hike to 1.75% in November 2018 and further to a terminal rate of 2.00% in August 2019 as it continues to normalise monetary policy (i.e., reducing monetary accommodation) in an effort to increase policy space as a contingency for the future.”

“With rate hike expectations for H2 2018 still intact, we maintain a 6m forward 1s4s IRS steepener, as we expect term premia to normalise from currently depressed levels.”