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Korea will probably start to tighten in Q3

The Bank of Korea (BoK) left its policy rate at 2.0% today, as expected. The turmoil in the markets and the European debt crisis weighed heavily in the decision to stay on hold. However, the local economic upswing should not come under serious threat, political pressures are diminishing, and the BoK retained its tightening bias. We expect the policy rate to move up in August.

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