We expect Korea’s central bank to raise its base rate by 25bp to 3.25% on Friday. This is also the consensus view. GDP growth was strong at the start of the year while core inflation, which excludes food and fuel, is high and looks set to climb further. We expect the policy rate to reach 4.0% by end-2011. There is also room for the won to appreciate in the fight against inflation without materially affecting exporters.
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