Korea Monetary Policy


Central Bank keeps rates unchanged in July

At its 11 July monetary policy meeting, the Bank of Korea (BoK) left the base rate unchanged at 2.50%, a move that was widely expected by the market.

In the accompanying statement, the Bank highlighted its expectation that the modest global recovery will be sustained. It noted, however, that the sluggish economic activity in the Eurozone and the possibility that the U.S. Federal Reserve will reduce its bond buying program earlier than expected pose a risk to growth.

Monetary authorities said that economic growth continues, although weakly. Exports have been improving, while other domestic demand indicators have shown a mixed picture. Going forward, the Central Bank expects the Korean economy to continue to grow below potential due to the weak global recovery.

The Bank expects inflation to remain relatively low, although it will likely increase in the second half of the year due to a base effect. The BoK's inflation assessment and increasingly optimistic view on economic growth suggest that its easing cycle ended with the rate cut in May.

For 2013, panellists expect the monetary policy rate to end the year at 2.67%. For 2014, the panel expects the policy rate to end the year at 3.15%.


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Korea Monetary Policy Chart

Korea Monetary Policy July 2013

Note: BoK Base Rate in %.
Source: Bank of Korea (BoK).

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