The Bank of Korea raised its key interest rate to a six-year high of 4.75% in July, reflecting concerns that the stronger than expected economic recovery and high money supply growth could fan inflation. However, we are far from convinced that rates needed to rise at all. We therefore think that this increase is likely to be the last and that the next move will be down. Elsewhere, we expect additional rate cuts in Thailand and Indonesia, while Indian interest rates probably have further to rise.
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