Bank of Korea Holds Base Rate Steady for 11th Month



South Korean Monetary Policy Committee decided to leave the base rate steady for the 11th straight month at record low of 1.5 percent at its May, 13th meeting, as expected. While forecasting the economy to continue its modest recovery, policymakers viewed consumer prices will continue at a low level, under the influence of low oil prices .

Excerpts from the statement by the Bank of Korea: 

Looking at the Korean economy, exports have remained on their trend of decline, and domestic demand activities such as consumption, and the sentiments of economic agents have continued their modest improvements. On the employment front, while the pace of increase in the number of persons employed slowed somewhat in April, the employment-to-population ratio and the unemployment rate maintained the same levels as in April of last year. The Board forecasts that the domestic economy will continue its trend of modest improvement going forward, centering around domestic demand activities, but in view of external economic conditions judges the uncertainties surrounding the growth path to still be high.
 
Despite expansions in the extents of increase in prices of industrial products other than petroleum, consumer price inflation registered 1.0% in April, the same as in March, in line mainly with a slowdown in the rate of service fee increase. Core inflation excluding agricultural and petroleum product prices rose slightly to 1.8%, from 1.7% in March. Looking ahead the Board forecasts that consumer price inflation will continue at a low level, under the influence of the low oil prices for example. In the housing market, sales prices maintained their level of the previous month while leasehold deposit prices showed low rates of increase.
 
In the domestic financial markets, stock prices and long-term market interest rates have fallen since April after having previously risen, affected mainly by changes in investor preferences for safe assets. After having appreciated against the US dollar, the Korean won has depreciated against it again. The won has meanwhile depreciated considerably against the Japanese yen, in line with the yen’s strengthening. Bank household lending has sustained a trend of increase at a level exceeding that of recent years, led by mortgage loans.
 
Looking ahead, while working to support the recovery of economic growth the Board will conduct monetary policy so as to maintain price stability over a medium-term horizon, and also pay attention to financial stability. In this process it will closely monitor any changes in monetary policies or in financial and economic conditions in major countries, the progress of corporate restructuring, the trend of increase in household debt, and the movements of capital flows.

Bank of Korea Holds Base Rate Steady for 11th Month


Bank of Korea l Rida Husna | rida@tradingeconomics.com
5/13/2016 3:24:31 AM