Bank of Korea stands pat for second straight time, as expected

SEOUL  – South Korea’s central bank on Tuesday held interest rates steady for a second consecutive meeting, as expected, saying inflation remained the prime policy target even as economic growth would likely miss its projection.

The Bank of Korea said its seven-member monetary policy board voted to keep the base rate unchanged at 3.5 percent, as it did on Feb. 23.

It said in a statement economic growth this year would slow to further below its earlier projection of 1.6 percent from last year’s 2.6 percent, but added its monetary policy stance would remain on a tightening bias as inflation remained far above its target.

Local markets showed a muted reaction as investors waited Governor Rhee Chang-yong’s news conference from 0210 GMT.

The rate decision was in line with predictions from 39 out of 40 economists surveyed by Reuters, while one respondent had forecast a 25-basis-point hike.

It is the first time the Bank of Korea has kept the policy rate steady at successive meetings since it embarked on a tightening campaign in August 2021.

South Korea’s annual consumer inflation has eased since peaking at a 24-year high of 6.3 percent in July 2022 to hit 4.2 percent in March this year, although it is still more than double the central bank’s target of 2 percent.

Governor Rhee said after the February board meeting his bank would not need to resume rate hikes if inflation continued to moderate, but refused to declare the tightening cycle was over.

South Korea’s heavily trade-reliant economy has been losing momentum, hit by the slowing global economy, still sluggish demand from China, and cooling consumer spending at home after aggressive interest-rate hikes.

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