Korea: Bank of Korea stands pat in May
May 24, 2018
At its 24 May meeting, the Monetary Policy Board of the Bank of Korea (BOK) decided to keep the base rate unchanged at 1.50% amid heightened uncertainty and recent data pointing to weaker economic growth. The base rate has remained at 1.50% since the Bank hiked it in November of last year. The move in May was widely in line with market expectations.
The Bank’s decision came against a backdrop of subdued inflation, which left little room for a rate hike in May. Although inflation picked up to 1.6% in April from 1.3% in March due to higher oil and agricultural prices and January’s minimum wage increase, it remained below the official 2.0% target for the seventh consecutive month. Core inflation, meanwhile, was stable at 1.4% in April. The BOK maintained its projection that inflation will approach the 2.0% target in the second half of the year. The economy remains on course for solid growth in 2018, despite recent disappointing economic data, including slower job growth and a contraction in exports in April.
The Bank struck a cautious tone in its communiqué, highlighting external uncertainties and weaker job growth at home. In line with its previous statements, the Bank emphasized it will continue implementing monetary policy with a focus on supporting economic growth, stabilizing inflation at its 2.0% target and ensuring financial stability. The majority of FocusEconomics panelists currently have a rate hike penciled in during the third quarter.
The next meeting of the BOK’s Monetary Policy Board is set for 12 July.
Author: Lindsey Ice, Economist