South Korea holds rates

Bank of Korea Governor Lee Ju-yeol ran his term's last monetary meeting on Tuesday, keeping interest rates on hold and talking up the health of South Korea's economy but warning of the cost of US protectionism to Korea's car and steel industries. Lee told a news conference that the Bank of Korea was not obliged to follow a global withdrawal of stimulus measures, further cementing a consensus view that the bank's monetary tightening will be gradual after its last hike to 1.50 percent in November.
The Federal Reserve's monetary policy committee meets on March 20 and 21, with markets focused on the prospect of another Fed rate rise following its December hike. "South Korea's monetary policy is not decided automatically based on the monetary policy of the United States. Going forward, we will make our policy decisions comprehensively by looking at the economy, inflation and US monetary policy," Lee said after the last rate decision before his term ends in March.
Lee reiterated that the risk of major capital outflows from South Korea wasn't significant, even if the US policy rate were to rise above South Korea's. "It seems Lee was being extra careful with his words, more so than other times because it was his last (rate decision event), out of concern that if he gives any clarity on future policy moves, it could limit policy room for the next governor," said Kang Seung-won, a fixed-income analyst at NH Investment & Securities.
The bank's decision to keep the seven-day repurchase rate at 1.50 percent was expected by all 14 economists surveyed by Reuters. Eight of the 14 economists surveyed expected the BOK to lift rates in May, with the others seeing a rise later. Lee acknowledged the challenge from US trade policies, saying South Korean industries that run the biggest trade surpluses with the United States would be hardest-hid by any stiffening of US trade curbs.
"For example, I think we can say the auto and steel industries would be representative of that," Lee said. The US Commerce Department has recommended President Donald Trump impose steep curbs on steel imports, including those from South Korea, after slapping bigger taxes on washers and solar panels in January.