BOK: Still In Easing Mode, Scope For Larger Cuts, But Outlook Uncertain
The BoK cut rates by 25bps, as widely expected, taking the policy rate to 2.50%. It maintained a clear easing bias noting in its statement: "the Board will maintain its rate cut stance to mitigate downside risks to economic growth and adjust the timing and pace of any further Base Rate cuts while closely monitoring changes in the domestic and external policy environments and examining the resulting impact on inflation and financial stability."
- This came after the central bank slashed its growth forecast for 2025 to 0.8%, versus the 1.5% projection made in February. The 2026 projection was also nudged down, while inflation forecasts were relatively steady and hold just under 2%.
- Governor Rhee in the press conference noted today's decision was unanimous, while stating that 4 out of 6 board members see lower rates in 3 months, while 2 board members see policy rates on hold over this period.
- Rhee noted that the 2025 GDP projection doesn't reflect fiscal pledges made by the Presidential candidates (with the election to be held on June 3). In the statement BOK noted: "The future economic growth trajectory is assessed to be subject to significant uncertainty, stemming from developments in trade negotiations, government stimulus measures, and monetary policies in major economies."
- Rhee stated there was scope for larger rate cuts in the future, but this would depend on how the growth outlook evolves given the new lower projection for 2025.
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CHINA: Bond Futures Rally on Liquidity Injection
- This morning’s OMO saw a sizeable liquidity injection and unsurprisingly bonds are rallying.
- China’s 10YR bond future is up +0.185 to 109.04 and remains firmly above all major moving averages, the nearest being the 20-day EMA of 108.73
- The 2YR bond future is up just +0.03 at 102.36 and remains below all major moving averages, the nearest being the 20-day EMA at 102.43.
- The cash market is strong also with the CGB 10yr down -1bp this morning at 1.63% with the Hang Seng and Shenzhen bourses higher whilst the CSI 300 is down marginally
CANADA: Networks Calling Election For Carney, Too Soon To Know If Majority
With results now coming in from Canada’s more populous provinces CBC and CTV are calling that Mark Carney will stay PM but it is still too early to say whether his Liberals will have a majority. There has been little change of seats between parties so far. Elections Canada currently has the Liberals leading in 133 districts (50.0% vote share), Conservatives in 93 (38.7%), Bloc Quebecois in 17 (4.8%) and New Democrat in 3 (4.4%). 172 seats are needed to form a majority government.
CHINA PRESS: A-share Market To Be Supported - Analyst
Authorities' support for the A-share market together with China’s low interest rate environment could drive up stock prices in the long run, said Wu Zhaoyin, chief investment officer at Soochow Futures. In the near term, major indexes may fluctuate as firms release annual and quarterly reports, and U.S. tariffs could be adjusted during the May 1-5 holiday period when the exchanges are closed, said Wu, noting impacts can be controlled.
