BOK overturns expectations and cuts interest rates.
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July 18 , 2019 / Chuo Daily Japanese Edition
한은,3년만에전격 금리인하…성장률 전망치 대폭 하향(종합)
The Bank of Korea
(BOK) Monetary and Monetary Committee held a plenary meeting
at the Korea Central Bank of Seoul on July 18
to cut the policy interest rate by 0.25% to 1.5% a year .
The ROK has kept interest rates unchanged since it raised its policy rate
by 0.25% in November last year.
The market expected to keep interest rates this month,
but it is analyzed that the ROK and the Bank decided to cut interest rates
as the effects of economic slowdown and external uncertainty .
While the uncertainty over US-China trade disputes continues,
the abolition of Japan's preferential treatment will become a new assassment,
which may reduce the growth rate.
It responded earlier than market expectations.
What pushed the back of the bank is the uncertain economic environment
and a swaying indicator.
Following the decline in the gross domestic product
( GDP ) growth rate in the January-March quarter ,
it is expected that the economy
in the April-June quarter will not recover as expected .
Exports have fallen for seven consecutive months
from December last year to June this year
due to the sluggish semiconductors that have driven Korea's exports .
The situation has not improved this month.
The government's execution of the revised budget is also behind expectations.
Therefore, the cloud has spread
to the forecasted economic growth rate of this year.
Following the government's downward revision
to this year's forecasted growth rate to 2.4-2.5%,
the ROK and the Bank announced their revised economic outlook
this afternoon, with the forecasted growth rate of 2.5%
It is expected to be revised downward from
Researcher Lee Myson of Hana Financial Investment
"If Japan continues to restrict semiconductor material exports
to Korea throughout the second half of the year
and the abolition of export incentives extends
to industries other than semiconductors,
this year's economic growth rate may fall by 0.8%. "
It showed the view that.
The possibility that the United States will cut interest rates
and turn to a palliative monetary policy has increased,
and the point where the monetary policy has sufficient capacity is interpreted
as the reason for the ROK and BOK to take out the rate cut cards.
The market is affirmed that the Federal Open Market Committee
(FOMC) will cut its policy rate cut on 30-31 (local time).
President Powell, President of the Federal Reserve Board
( FRB ), strongly suggests lowering the policy rate to support this.
BOK cut interest rates for the first time in three years
... Growth rate forecasts significantly lower
http://biz.chosun.com/site/data/html_dir/2019/07/18/2019071800930.html
2010.07.18
This year's economic growth rate forecast 2.5 → 2.2 % down
... With economic recovery expected in the second half
Delete variable on beauty rate reduction notice
... Japan's economic preferential abolition, export conditions worsen
Korea's base rate is currently 1.50 % a year,
only 0.25 percentage points
( p ) higher than the lowest interest rates ever generated ( 1.25 %).
The market's expectation that monetary policy's ability
to delay the rate cut will be out of sight in August .
The reason for the Bank of Korea lowered the benchmark interest rate
because the downturn is more serious than expected this year.
The Bank of Korea revised its economic growth forecast this year
from 2.5 percent to 2.2 percent according
to the revised economic forecast announced on the same day.
李柱烈（LeeJyul,이・ 쥬요루）
President of the Bank of Korea on the 18th at Seong-ro , Seoul
"After the economic forecast of April this year,
we have forecasted this year's
economic growth rate to be 2.2 %
and the rise in consumer prices to be 0.7 % ,
taking into account the changing economic environment surrounding
Korea's economy."
Said.
It is the first time in four years since July 2015 that the BMS lowered
its forecast by 0.3 % P at a time,
due to the combined structural adjustment
of EMS and the shipbuilding industry.
The Bank of Korea's decision is a sideline
that is urgently needed to boost the economy.
With the bee ( it never rains but it poors ) in the middle of the year
when China-US trade disputes and the semiconductor recession are expected
to lead to the second half of this year,
Japan has begun abolishing Korea's semiconductor
export preferential treatment.
Lee Jyul, President of Korea ,
said that the downturn in the growth rate of the day partly reflected
the negative impact of the abolition of Japanese export preferential treatment.
reduction The first rate cut after shipbuilding industry adjustment
... "The interest rate freeze disappears"
It was the last time in June 2016
that the ROK and the Bank lowered the interest rate.
At that time, the Bank of Korea lowered the interest rate
from 1.50 % to 1.25 % in response to the structural adjustment
of the shipbuilding industry and the impact of the UK's withdrawal
from the European Union ( EU ).
In March and June 2015 , the economic downturn and the situation of Merss
( MERS , Middle East Respiratory Syndrome)
became the background of the rate cut.
As far as stability of the game and financial stability are obligated,
it shows the pattern of lowering interest rates only
when the downturn in the economy becomes clear.
The biggest reason for the current rate cut is
that the export environment is continuously deteriorating .
In particular, there is no sign of improvement
in the semiconductor business, which accounts for 20 % of exports .
Korea's export growth rate (customs clearance basis)
has been tabulated as -2.6 % from 1st to 10th of this month,
and the possibility to record negative for 8 consecutive months
has increased.
The probability of improvement is not large in the second half
of the late recovery of semiconductor prices in US-China trade disputes,
which President Lee Jyul mentioned.
Japan's preferential decommissioning is a factor
that can make semiconductor exports worse.
Following the government's abolition of the export preferential treatment
for Korea's three semiconductor and display core materials from April 4 ,
the Japanese government suggested
that Korea be excluded from the " white list "
which is a simplified state of export procedures .
Overseas Investment Bank ( IB ) Goldman Sachs predicted
that gross domestic product ( GDP ) would decline
by 0.4 % if semiconductor production in Korea decreased
by 10 % due to the abolition o
f Japanese semiconductor material export preferential treatment.
President 李柱烈（LeeJyul,이・ 쥬요루）
is concerned about the impact of abolishing Japanese exports
"When considering the scale of trade between Korea and Japan, industry,
and business collaboration, etc.,
the abolition of export preferential treatment to Korea will be realized,
and if it is expanded ,
the influence of exports and the Korean economy should be small. Can not do
Said.
◇ As long as the growth rate in the low 2 % range as long as
... " Additional reduction theory Yura Yura"
In particular,
this rate cut is even more meaningful as it is a first- rate cut ahead of the US .
In the initial market, the US Federal Reserve
( Fed ) foretelled a rate cut at the end of this month,
but the ROK and B, after having confirmed this,
the prospect of lowering interest rates even in August was dominant.
Mr. Lee Myung Hana is a financial investment researcher
"It is very rare for the ROK and the Fed to adjust interest rates
earlier than this,
but this time uncertainty has fallen
and further interest rate cuts have been postponed,
and the name loss has disappeared."
"There is a great possibility that the adverse effects
on semiconductor exports will be prolonged
if negotiations with Japan are not only optimistic."
And
Markets have discussed the possibility of further rate cuts .
Even after the government's supplementary budget has been implemented,
if the economic improvement is unclear
or if the external economic environment worsens,
it may lower to the successive lowest interest rate of 1.25 %.
The view over time is better than next year.
Some commented that the ROK
and the Bank could lower interest rates to 1.00 % next year.
Gondon Rakkawari Securities researcher,
"There is a possibility that additional cuts will be made one time next year
while following the US interest rate reduction cycle."
And
Ochnseop Korea Investment Securities Researcher
"I think it has been able to reduce it to 1.00 %,
which is lower than the 1.25 % interest rate low viscosity
which is lowered twice next year."
Said.
In response, Lee Jyul , President Lee
"We can see that the current policy rate has been reduced
because we lowered the benchmark interest rate to 1.5 %,
but still we can see that we still have some policy excess power."
"A practical effective interest rate lower limit is one theoretical concept
that identifies from various aspects such as the risk of capital outflow ,
and this is taken into account to operate monetary policy"
Said.
◇ The government's optimistic perception of the economy
Private economic experts gave a positive evaluation
of the Bank of Korea ’s shocking rate cut and lower growth rates.
Professor Seong Tae Yung Eon University
"The downturn in the growth rate was inevitable in
that the slump in exports and the deterioration of investment continued,
and the friction between Japan and Korea could make
the external conditions of exports worse . "
Said.
On the other hand,
criticism of the Korean government's " economic optimism "
is expected to intensify.
The Ministry of Planning and Finance announced
the direction of economic policy in the second half on March 3 ,
and predicted the growth rate of this year to be 2.4 to 2.5 %.
It is at least 0.2 % p higher than the BOK's forecast.
The business report of the National Assembly Planning and Finance Committee,
which was held this day,
filled the Korean government's economic remorse with remorse .
Deputy Prime Minister and Planning Secretary of Finance ,
洪楠基（HonNamumugi,홍・ 남기 ） ,
"I think that the Bank of Korea's growth rate forecast has been adjusted
to a lower level than expected."
While saying
"The government's prospect of a growth rate
of around 2.4 % is based
on the result of mobilizing various policy instruments."
Said.
In the market,
if Japan's semiconductor material export preferential abolition is abolished ,
the ROK and the BBO have not ruled out the possibility
of an additional downward growth rate .
The Bank of Korea has passed the economic outlook
for October more than once.
Park Sang-Hyun Hai Investment Securities Researcher
"If the trade friction between Korea and Japan is sustained,
and there is an obstacle to the production of semiconductors
by Korean companies, there is a possibility
that this year's growth rate forecast may fall below 2 % ."
And