Contrary to my thinking, the bank didn't cut today. The reasoning – KRW weakness and political uncertainty – wasn't a shock. However, the tone of the meeting was very doveish, with the bank talking about "intensified" downside risks to growth. Korea really looks very different to Japan and Taiwan.

I've revised my model for the BOK's reaction function. That suggests the probability of loosening tomorrow is about the same as the Q4 meetings when rates were cut. Considerations for later in the year are yesterday's SLO survey warning of a rebound in housing, and firm services CPI.

Recent data and the minutes of the November BOK meeting offer a good opportunity to look at Korea in light of the latest bout of political turmoil. The conclusion: a weak cycle is getting weaker, and so exchange rate depreciation is unlikely to stop the BOK cutting further.

Today's headline employment data were stable, but the details are weaker, and the weakness in business confidence points to employment falling in 2025. Separate export data for the first 10 days of December show momentum remaining weak.

Headline November CPI data don't challenge the BOK's confidence that inflation is under control. But private services inflation continues to creep up, with SAAR now above 3%. That core has remained around 2% is because of cheaper public services. With budget tightening, that seems tough to sustain.

As expected, weak growth is now the BOK's main concern, with the bank reacting by cutting rates for a second consecutive time. The bank was already feeling confident about CPI, and worries about property have now also receded. If planned measures constrain $KRW upside, further rate cuts are likely.

Today's business survey shows activity taking another step-down. The reason is the rolling over of external demand, which matters even more when domestic demand is already so weak. Price data this month aren't so soft, but cycle concerns are likely to become the number one concern for the BOK.

The BOK has been slow to cut, and when it finally did in October, its tone was hawkish. Since then, however, growth of both exports and household debt softening. This opens up room for the BOK to become more doveish, with the risks being KRW weakness, and sticky services price inflation.

In recent years, trade and FDI flows from Taiwan and Korea have clearly shifted from China to the US. That's what Trump One and Biden wanted, but Trump Two won't like the rising trade deficits, or the CHIPS and IRA subsidies. If he threatens tariffs, will Taiwan offer a stronger TWD in response?