On Thursday morning (July 18), the Bank of Korea unexpectedly lowered its benchmark interest rate by 25 BP to 1.5%, while lowering its economic growth and inflation expectations for the first time since 2016. In the afternoon, Indonesia's central bank announced that it would reduce the 7-day repo rate by 25 BP to 5.75%, the first time in nearly two years that the benchmark interest rate had been lowered. Later that evening, the Ukrainian central bank announced that it would cut its main interest rate to 17%. The Bank of South Africa cut its key interest rate by 25 basis points to 6.50%, the first rate cut since March 2018.
As early as June 12, Lee Julie, President of the Korean Central Bank, said at the event that he would respond appropriately to changes in the economic situation. The Yonhap news agency cited the analysis as suggesting that the Bank of Korea may cut its benchmark interest rate to stimulate the economy.
Since the beginning of this month, the trade data released by the Korea Customs Office has been unsatisfactory. South Korea's exports fell 13.5% year-on-year in June, the seventh consecutive month of decline, and the largest decline since the beginning of 2016. Semiconductor exports fell by 25.5%.
According to IHS Markit, the PMI of Korean manufacturing industry in June was 47.5, less than 48.4 in May, the worst contraction since February. New export orders fell for the 11th consecutive month in June, the longest decline in history.
At the same time, Japan's Ministry of Economy and Industry announced on July 1 that it would impose strict export management system on South Korea, which undoubtedly exacerbated the market's pessimism.
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