Citigroup: Bank of Korea to Prioritize Market Stability Over Rate Hikes

Deep News
Yesterday

Citigroup economists stated that in response to high oil prices and the depreciation of the Korean won, the Bank of Korea may opt to collaborate with financial authorities to stabilize the bond and foreign exchange markets instead of raising interest rates. Economist Jin-Wook Kim wrote in a report that if necessary, South Korea's foreign exchange authorities might take decisive measures to stabilize the exchange rate, similar to actions taken in late December. "We believe that, if needed, reducing fuel taxes could curb the transmission of exchange rate and oil price effects to domestic inflation." If the yield on 3-year Korean Treasury bonds remains above 3.2%, the Bank of Korea may purchase government bonds. The central bank will provide liquidity support through open market operations to manage overnight repo market liquidity.

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