Korea's monetary tightening set to resume

The Bank of Korea meets on Tuesday and, we judge, will probably lift its 7-day repo rate by 25bp to 2.5%. GDP growth has inevitably slowed given the tougher global environment but domestic demand is continuing to expand at a reasonable pace. What’s more, the strains on the tradedependent sectors should ease in coming quarters and it is likely that the economic upswing will gain more traction during the course of next year. The policy interest rate also remains extremely low while inflation pressures are building and look unlikely to subside anytime soon.