Korea: Central Bank keeps rates unchanged in August
August 8, 2013
At its 8 August monetary policy meeting, the Bank of Korea (BoK) left the base rate unchanged at 2.50% for the third consecutive month, a move that was widely expected by the market.
The accompanying statement indicated that the Bank foresees the global economy sustaining its slow recovery, led by improvements in the United States. Nevertheless, changes in global financial market conditions as a result of the Fed tapering quantitative easing, a slowdown in China, and fiscal consolidation in the major countries, continue to pose risks to growth.
Monetary authorities said that economic growth continues, albeit weakly. Exports have been improving, whereas other domestic demand indicators have shown a mixed picture. Going forward, the Central Bank expects the Korean economy to continue to grow below potential, although prospects are improving.
The Bank expects inflation to maintain a stable trend, 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%.