Korea: Central Bank keeps rates still for the sixth month in a row
April 11, 2013
At its 11 April monetary policy meeting, the Bank of Korea (BoK) left the Base Rate unchanged at 2.75% for the sixth consecutive month. Markets are, however, expecting an imminent rate cut in coordination with a government stimulus package - which is likely to be announced this month. The South Korean economy is now threatened by rising political tensions with North Korea and massive quantitative easing in Japan, as the strong depreciation suffered by the Japanese yen hurts Korean exports, making them comparatively more expensive.
In the accompanying statement, the Bank highlighted that it expects the modest global recovery to be sustained but noted that the fiscal crisis in the Euro Area and the fiscal consolidation in the United States still pose a risk to growth.
Domestically, the committee acknowledged weak growth despite increasing investment and an improving trend in exports. Regarding price developments, the Bank expects inflation to remain relatively low amid easing demand-side pressures.
The Central Bank recently revised its outlook for inflation, expecting inflation to reach 2.3% this year and 2.8% in 2014. 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%.