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Politics will stay in the way of Korea rate hikes

The Bank of Korea (BoK) left its policy rate at 2.00% today, as expected. BoK Governor Lee’s term ends this month and his replacement is likely to be sympathetic to the government view that monetary tightening can be delayed. We continue to expect the first increase in policy rates to come in Q3 and that the monetary tightening to come will be less aggressive than markets currently envisage.

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