Bank Of Korea Holds Key Rate Steady At 3.50%

bankofkorea july18 24may23 lt

South Korea's central bank left its key interest rate unchanged for the third straight meeting on Thursday but the bank chief signaled that more rate hikes cannot be ruled out due to the persistent inflation.

The Monetary Policy Board of the Bank of Korea, headed by Governor Rhee Chang-yong, unanimously decided to keep the Base Rate unchanged at 3.50 percent.

The central bank has hiked its policy rate by a total 300 basis points since August 2021, taking it to the highest level since 2008.

"It is forecast that inflation will remain above the target level for a considerable time although it has continued to slow," the bank said in the statement.

"The Board therefore judged that it is appropriate to maintain its current restrictive policy stance," the BoK added.

The board observed that there will be a considerable period of time before inflation stabilizes at the target and there still remain uncertainties surrounding the pace of slowdown in core inflation.

The BoK members were more hawkish and the governor refused to rule out the chances of further rate hikes.

However, Capital Economics' economist Gareth Leather said with inflation falling back, the economy struggling and the housing market downturn deepening, there is a good chance the central bank will start loosening monetary policy later this year.

The central bank downgraded its economic growth outlook to 1.4 percent from the February forecast of 1.6 percent for 2023 as exports and investment continued to be sluggish.

At the same time, consumer price inflation for this year is expected to be consistent with the February forecast of 3.5 percent. However, the outlook for core inflation was lifted to 3.3 percent from 3.0 percent.

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