Korea Monetary Policy


Central Bank keeps interest rate unchanged

At its 8 December monetary policy meeting, the Bank of Korea (BoK) kept the Base Rate unchanged at 3.25%, a decision that was in line with market analysts' expectations. After tightening the policy reins in June, the BoK has now refrained from raising rates for five consecutive meetings. At the current 3.25%, however, the policy rate still remains at its highest level since November 2008. In the accompanying statement, the BoK highlighted the ?sluggishness? in the performance of major economies, in addition tosigns of moderation in emerging market economies. Despite the uncertain global outlook, the BoK believes that the Korean economy ?will not deviate significantly from its long-term trend of growth going forward?, although it recognizes that ?downside risks to growth remain high due to the impact of external risk factors?. Meanwhile, inflation picked up, moving once again above the BoK target range of 3.0% 1.0 percentage points in November. The BoK expects prices to stabilize going forward, on the back of moderating agricultural prices and a favourable base effect from last year, although at a moderate pace. The BoK reiterated its intention ?to firmly anchor for price stability amid continuing sound growth of the economy.

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