Bank of Korea Keeps Base Rate Steady for 9th Month


South Korean Monetary Policy Committee decided to leave the base rate steady for the 9th straight month at record low of 1.5 percent at its March, 10th meeting, as expected. While highlighting the persistent decline in exports, policymakers viewed the economy will continue its recovery going forward, centering around domestic demand activities,

Excerpts from the statement by the Bank of Korea:

Looking at the Korean economy, the trend of decline in exports and the weakening recovery of domestic demand activities such as consumption are continuing, while the sentiments of economic agents have been sluggish. On the employment front, as the number of persons employed has steadily increased, the employment-to-population ratio rose in January compared to that in January last year, while the unemployment rate fell. The Board forecasts that the domestic economy will continue its recovery going forward, centering around domestic demand activities, but in view of external economic conditions judges the uncertainties surrounding the growth path to be high.
 
Consumer price inflation rose to a significant extent in February, from 0.8% the month before to 1.3 percent, owing chiefly to increases in agricultural product prices. Core inflation excluding agricultural and petroleum product prices meanwhile rose slightly to 1.8 percent, from 1.7 percent in January. Looking ahead the Board forecasts that consumer price inflation will continue at a low level, due mainly to the low oil prices. In the housing market, sales and leasehold deposit prices showed low rates of increase in both Seoul and its surrounding areas and the rest of the country.
 
In the domestic financial markets, influenced by the global stock market recovery and by a subsiding of foreigners’ securities investment fund outflows, stock prices have risen sharply since February and the Korean won, after having depreciated, has appreciated to a considerable extent against the US dollar. The won has meanwhile depreciated against the Japanese yen, in line with the yen’s strengthening. Long-term market interest rates have rebounded slightly after having declined, in response mainly to interest rate movements in major countries. 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 sustain the recovery of economic growth, the Board will conduct monetary policy so as to maintain price stability over a medium-term horizon, and pay attention to financial stability. In this process it will closely monitor external risk factors such as any changes in the monetary policies of major countries or in financial and economic conditions in China, the movements of capital flows, geopolitical risks, and the trend of increase in household debt.

Bank of Korea Keeps Base Rate Steady for 9th Month


Bank of Korea l Rida Husna | rida@tradingeconomics.com
3/10/2016 3:03:56 AM