The Bank of Korea (BoK) left its policy rate unchanged today. Property price concerns and improvements in the activity data have increased the chance that the BoK will raise rates sooner rather than later. But core inflation should trend lower over the next few months, buying the BoK some time. We now expect a first hike in Q1 2010 and then, in line with the market, see a gradual tightening with rates climbing to around 2.5% by this time next year.