Korea Monetary Policy


Central Bank pauses policy tightening, surprising markets

At the monetary policy meeting held on 11 February, the Bank of Korea (BoK) unexpectedly left the BoK Base Rate unchanged at 2.75%. The decision marks a pause in the tightening cycle, which saw the BoK raise interest rates three times since July 2010. At the current level, the policy rate remains at its highest level since January 2009. The Central Bank remains concerned about mounting inflationary pressures, driven by the continued upswing in economic activity and the surge in oil and food prices. Nevertheless, the BoK stated that the effects of the previous tightening moves are filtering through the economy, which is reflected in increasing long-term interest rates. Market analysts believe that the BoK will resume lifting interest rates as early as its next policy meeting on 10 March.

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