Bank of Korea forecast to cut rates amid global currency war

Bank of Korea forecast to cut rates amid global currency war

Central banks around the world are devaluing
their currencies to keep themselves competitive. Korea has been no exception,… cutting its
rate to a record-low one-and-a-half percent over the past year or so.
And analysts say further cuts could be on the horizon soon.
Park Se-young has the details. The “global currency war” is intensifying,
with central banks in various countries following China’s movement to weaken their local currencies.
According to Bloomberg, the People’s Bank of China cut the yuan midpoint by 0.22 percent
in January, …after having devalued its local currency by nearly five-percent in just four
days last August. The PBOC did on Thursday raise the yuan fixing
by zero-point-1-6 percent to fight off bearish sentiments.
The Bank of Japan recently adopted a negative interest rate strategy, which will in effect
drive down the yen. The European Central Bank, having rolled out
a negative rate policy in 2014, is likely to cut its interest rates again in March. Global investment banks are extending their
forecasts of the Bank of Korea lowering its benchmark interest rate within the first three
months of the year. Speculation of a rate cut at this month’s
policy meeting rose sharply after the BOJ’s negative interest rate announcement,. … following
concerns of the Korean won appreciating against the yen and hurting exporters.
Korea’s exports shrank 18-point-five percent on-year in January, …the biggest drop since
2009. But the country’s heavy household debt and
the potential of a faster outflow of foreign capital are factors that could prevent the
BOK from lowering rates further. Park Se-young, Arirang News.

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