Korea: Central Bank stays put in August
August 11, 2011
At the monetary policy meeting held on 11 August, the Bank of Korea (BoK) kept the Base Rate unchanged at 3.25%, in a decision that was in line with market analysts' expectations. The BoK refrained from raising rates for a second consecutive meeting, after tightening the policy reins in June. At the current 3.25%, the policy rate is at its highest level since November 2008. According to analysts, the decision to keep rates unchanged was heavily influenced by external factors. In particular, the likelihood of a global economic slowdown adds uncertainty to Korea's growth outlook, given the Korean economy's dependence on exports. Meanwhile, inflationary pressures remain strong, with inflation increasing from 4.4% in June to 4.7% in July on the back of rising prices for agricultural products. In the statement accompanying the decision, the BoK explained that it will conduct its monetary policy with a ?greater emphasis? on ensuring price stability in the coming months. However, market analysts are now uncertain whether the BoK will resume its series of rate increases before the end of the year.
Author: Armando Ciccarelli, Head of Data Solutions