Central banks of Korea and Malaysia to cut rates in 2012

Policy rates were left unchanged in Korea and Malaysia today, but both central banks are becoming increasingly concerned about the downside risks for exports. We expect policymakers in both countries to shift their focus away from tackling inflation towards supporting growth next year. The upshot is that, in contrast to the view held by most participants in the swap markets, we expect policy rates in both countries to end next year lower than where they are now.