Bank of Korea Holds Base Rate Steady in December


South Korean Monetary Policy Committee decided to leave the base rate steady for a sixth straight month at record low of 1.5 percent at its December 10th meeting. While noticing the persistent trend of declining exports, policymakers judged the economy will continue its recovery, centering around domestic demand.

Excerpts from the statement by the Bank of Korea:


Looking at the Korean economy, although domestic demand activities have sustained their paces of recovery, driven by consumption, the trend of declining exports has persisted while the improvement in economic agents’ sentiments has been inadequate. On the employment front, the number of persons employed has increased steadily, and in October the unemployment rate fell compared to that in October of last year while the employment-to-population ratio maintained the same level. 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 from 0.9% the month before to 1.0% in November, due mainly to a narrowing of the scale of decline in petroleum product prices and to expansions in the extents of increase in service fees. Core inflation excluding agricultural and petroleum product prices also rose to 2.4%, from 2.3% in October. Looking ahead the Board forecasts that inflation will continue at a low level, due mainly to the effects of the low oil prices. In the housing market, meanwhile, the upward trends of sales and leasehold deposit prices have persisted in both Seoul and its surrounding areas and the rest of the country. 

In the domestic financial markets, influenced mostly by expectations of a policy rate hike by the US Federal Reserve, stock prices have fallen, long-term market interest rates have risen, and the Korean won has depreciated against both the US dollar and the Japanese yen. Bank household lending has sustained a trend of increase at a level substantially 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 US Federal Reserve’s monetary policy or in economic conditions in emerging market countries including China, the movements of capital flows, and the trend of increase in household debt.

Bank of Korea Holds Base Rate Steady in December


Bank of Korea l Rida Husna | rida@tradingeconomics.com
12/10/2015 1:53:19 AM