South Korea Keeps Key Rate Steady At 1.25%


The central bank of South Korea left its base rate steady for the ninth straight meeting at a record low of 1.25 percent in April, as expected, saying inflationary pressures on the demand side are not expected to be high given the moderate pace of domestic economic growth. Policymakers also revised growth forecasts for this year to 2.6 percent from 2.5 percent. Inflation is expected to be higher at 1.9 percent from 1.8 percent.

Excerpts from the statement by The Bank of Korea:

The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.25% for the intermeeting period. Based on currently available information the Board considers that the global economic recovery has continued to expand. The global financial markets have shown generally stable movements, with the trend of rising stock prices continuing for example. 

The Board judges that the trend of domestic economic growth has expanded somewhat, as exports and investment have improved although consumption has remained low. The Board sees the domestic economy as likely to continue its trend of moderate growth going forward, and forecasts a rate of GDP growth for this year slightly above the January projection (2.5%). 

However, the paces of improvement in exports and domestic demand activities are expected to be limited, owing to changes in conditions related to trade with major countries and to the weak improvement in households’ real purchasing power. Consumer price inflation has continued at the 2% target level, in line mainly with increases in the prices of petroleum and agricultural, livestock and fisheries products. Core inflation (with food and energy product prices excluded from the CPI) has remained in the mid- to upper-1% range, while the rate of inflation expected by the general public has fallen to the mid-2% level. Looking ahead the Board expects that consumer price inflation will for the time being fluctuate at the 2% level, and for the year as a whole slightly exceed the January projection (1.8%). Core inflation will maintain a level in the mid- to upper-1% range.

Looking ahead, the Board will conduct monetary policy so as to ensure that the recovery of economic growth continues and consumer price inflation can be stabilized at the target level over a medium-term horizon, while paying attention to financial stability. As the inflationary pressures on the demand side are not expected to be high given the moderate pace of domestic economic growth, the Board will maintain its stance of monetary policy accommodation. In this process it will closely monitor conditions related to trade with major countries, geopolitical risks, the progress of monetary policy normalization by the US Federal Reserve, and the trend of increase in household debt.

South Korea Keeps Key Rate Steady At 1.25%


Bank of Korea | Chusnul Ch Manan | chusnul@tradingeconomics.com
4/13/2017 9:47:21 AM