Korea: Bank of Korea holds base rate at 2.00% for the third consecutive month
January 15, 2015
At its 15 January monetary policy meeting, the Bank of Korea (BoK) decided to keep the base rate steady at 2.00%. The decision was in line with market expectations and marked the third consecutive month in which the rate was kept unchanged—the Bank cut its rate twice in 2014.
In its accompanying statement, the BoK stated that it expects the global economy to continue growing at a moderate pace. While the US will grow at a solid rate, the Euro area’s economic growth is projected to remain sluggish. Moreover, the economic slowdown in China, along with political and economic unrest in the oil-producing countries, is also expected to take a toll on global economic growth in 2015. On the domestic front, the Bank pointed out that export growth has slowed, while domestic demand and economic sentiment remain weak. As a result, the Committee expects a modest trend of recovery in domestic demand going forward.
Regarding price developments, the BoK stated that annual inflation declined from 1.0% in November to 0.8% in December, mainly due to lower global oil prices. In contrast, core inflation, which excludes agricultural and petroleum prices, registered a much higher rise.
The Bank decided to keep the base rate stable at 2.00%. However, mirroring previous statements, the BoK pointed out that the Committee, “will closely monitor external risk factors such as international oil prices and shifts in major countries’ monetary policies, as well as developments related to the spare capacity in the domestic economy and the trends of household debt and capital flows.”
Author: Cecilia Simkievich, Economist