Emerging Markets Weekly by Lloyds TSB

The Bank of Korea is expected to raise its benchmark interest rate by 25bp to 2.5% at its meeting on Tuesday, in a pre-emptive step at curbing the accelerating trend in inflation. In October, inflation rose 4.1% year-on-year The Bank of Korea is expected to raise its benchmark interest rate by 25bp to 2.5% at its meeting on Tuesday, in a pre-emptive step at curbing the accelerating trend in inflation. In October, inflation rose 4.1% year-on-year, above the official target of 2%-4% (the range is an average for 2010-2012), reflecting higher import and food prices. Following the hawkish comments by the BOK governor regarding the inflation outlook at the G20 meeting, we believe rates will be raised by 25bp to 2.5%. That said, we expect the BOK to reiterate that a stronger KRW, and the risks to exports, remain key concerns and will be closely monitored.

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