Money in Korea
Korea - Money
BOK cuts base rate in October on sluggish domestic growth
At its 16 October monetary policy meeting, the Bank of Korea (BOK) voted to cut the base rate by 0.25 percentage points to 1.25%, as had been widely expected by market analysts. The decision comes amid a dim outlook for the Korean economy and is the second cut this year. Interest rates are now at a joint-record low.
The Bank pointed to a wide number of factors behind the decision, including slow domestic growth, muted price pressures and difficult external conditions. Year-on-year exports contracted for the 10th consecutive month in September amid U.S.-China trade tensions, and the Bank now projects annual GDP growth to fall below its July estimate. Moreover, prices fell in September, driven lower by fuel and food prices, while the Bank predicts inflation to remain below its target rate of 2% next year. Meanwhile, volatile global financial markets and dovish sentiment from major central banks provided further reasons to cut rates.
The BOK remained dovish in its communiqué. It maintained that it would “conduct monetary policy so as to ensure that the recovery of economic growth continues and consumer price inflation can be stabilized at the target level”, and spoke of maintaining an “accommodative monetary policy stance”. This indicates further monetary easing is possible going forward. This is aligned with the consensus view of FocusEconomics panelists, a number of whom see further rate cuts in 2020.
This view is not unanimous, however, and some panelists see rates unchanged. For instance, economists at Nomura view a rate cut in 2020 as unlikely. They noted that “the need to see the impact of rate cuts already delivered will lead to the BOK staying on hold this year, while […] further ahead it will be data dependent as it tries to balance growth and inflation concerns with financial stability risks and limited policy space”.
The next monetary policy meeting is set for 29 November.
FocusEconomics Consensus Forecast panelists expect the Base rate to end 2020 at 1.14% and to end 2021 at 1.33%.
Korea - Money Data
|Money (annual variation in %)||4.6||8.1||8.2||7.1||5.1|
5 years of economic forecasts for more than 30 economic indicators.
Korea Money Chart
Source: Bank of Korea and FocusEconomics calculations.
|Bond Yield||1.34||1.55 %||Sep 04|
|Exchange Rate||1,208||0.21 %||Sep 04|
|Stock Market||1,989||-0.40 %||Sep 04|
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November 1, 2019
Consumer prices increased 0.2% over the prior month in October, down from September’s 0.4% rise.
November 1, 2019
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) ticked up marginally from 48.0 in September to 48.4 in October, and thus remained below the 50-threshold that separates contraction from expansion in the manufacturing sector.
October 31, 2019
Industrial production increased 0.4% year-on-year in September, contrasting August’s revised 3.3% decline (previously: -2.9% year-on-year).
October 29, 2019
The Bank of Korea’s forward-looking business confidence indicator for manufacturers edged down to 72 in November from 73 in October, while confidence in the non-manufacturing sector also decreased to 72 points in November from 74 in the month prior.
October 24, 2019
According to preliminary data released by the Bank of Korea, the economy grew 2.0% in annual terms in the third quarter, matching the second quarter’s reading and just shy of market analyst expectations of 2.1% growth.