Bank of Korea Holds Base Rate Steady for 6th Month


The Bank of Korea left its base rate steady for the sixth straight month at record low of 1.25 percent at its December meeting, as expected. While saying the improvements in domestic demand have been weak, policymakers judged the downside risks to the future growth path had expanded a bit, owing chiefly to the high degrees of uncertainty in recent domestic and external conditions.

Excerpts from the statement by the Bank of Korea:

Looking at the Korean economy, exports have shifted to an increase but the improvements in domestic demand activities have been weak. On the employment front, the employment-to-population ratio in November was higher than that in November of last year, as the number of persons employed increased. The unemployment rate meanwhile maintained the same level as in November last year. The Board forecasts that the domestic economy will sustain its trend of modest growth going forward, in line with a recovery of the global economy, but judges that the downside risks to the future growth path have expanded a bit.

Consumer price inflation registered 1.3 percent in November, the same as in October despite the extent of decline in petroleum product prices having narrowed, as the pace of increase in prices of industrial products other than petroleum slowed. Core inflation excluding agricultural and petroleum product prices fell slightly to 1.4 percent, from 1.5 percent in October. In the housing market, sales and leasehold deposit prices have shown upward trends, centering around Seoul and its surrounding areas. Looking ahead the Board forecasts that consumer price inflation will gradually rise, due mainly to the effects of the increases in international oil prices.

In the domestic financial markets since November, influenced mainly by expectations concerning the new US government's economic policies and the monetary policy of the US Federal Reserve, long-term market interest rates and the Korean won-US dollar exchange rate have risen. The Korean won-Japanese yen exchange rate has meanwhile fallen, in line with the yen’s relative weakening. Stock prices have rebounded after having declined, owing in part to increases in global stock prices. The extent of growth in household lending has expanded, led by home mortgage loans.

Looking ahead, the Board will conduct monetary policy so as to ensure that the recovery of economic growth continues and consumer price inflation approaches the target level over a medium-term horizon, while paying attention to financial stability. In this process it will closely monitor the uncertainties in domestic and external  conditions and their effects, the progress of monetary policy normalization by the US Federal Reserve, and the trend of increase in household debt.





Bank of Korea Holds Base Rate Steady for 6th Month


Bank of Korea l Rida Husna | rida@tradingeconomics.com
12/15/2016 2:07:00 AM