Korea: Bank of Korea holds interest rates steady in February
February 28, 2019
At its 28 February monetary policy meeting, the Bank of Korea held the base rate steady at 1.75%, as had been expected by market analysts.
The decision primarily reflected weak inflation in recent months and lower forecasts for future inflation. Inflation dropped to 0.8% in January, down from 1.3% in February and marked the lowest reading in one year. Core inflation, meanwhile, slowed to 1.0% in February, down from 1.1% in January. Looking ahead, the Bank of Korea said inflation will “fluctuate for some time below 1.0%, slightly lower than forecast in January”, while the Bank saw core inflation gradually ticking up. In addition to depressed price pressures, the Bank of Korea noted that global economic growth is slowing, although it maintained its Korean GDP growth forecast of 2.6% for 2019, which would be down only slightly from 2.7% in 2018.
The Bank of Korea gave little away about its future monetary policy moves going forward. Nonetheless, it affirmed that it would continue to be motivated by ensuring robust economic growth, achieving target inflation of 2.0% over the medium-term, and domestic financial stability. It also stated it would pay close attention to monetary policies in other key economies, especially in the United States, as well the increase in Korean household debt and geopolitical risks. The next monetary policy meeting is scheduled for 18 April.
Author: Edward Gardner, Economist