April 25, 2024

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[THE INVESTOR] Korea‘s central bank will likely hold its key rate steady at the upcoming monetary policy meeting due largely to low inflationary pressure, a leading provider of economic analysis said on April 8.

The Bank of Korea (BOK) is set to hold its rate review session on April 12 to decide whether to keep or adjust the current 1.5 percent. The BOK has maintained the present rate since it raised it by a quarter percentage point from an all-time low of 1.25 percent in November.

"The Bank of Korea will likely keep the policy rate unchanged at 1.5 percent in April. Following November’s 25-basis point increase, there has been little pressure for the BOK to raise rates further,” Moody‘s Analytics said in its weekly report.

Bank of Korea

“Inflation continues to be subdued, with consumer prices up a mild 1.3 percent year-on-year in March. A large minimum wage hike at the start of the year and the government’s expansionary policies have had a limited impact on price pressures to date,” it said.

A strengthening won, which recently hit its highest point in more than three years last week, is also helping inflation pressure remain low, the Moody‘s report added.

BOK Gov. Lee Ju-yeol has said that the central bank will maintain its accommodative stance for a while, as the South Korean economy shows weak signs of recovery.

But some experts here pointed out that the BOK will come under pressure to lift the key rate a couple of times this year, as the U.S. Fed’s rate rise in March caused South Korea‘s base rate to be lower than that of the US for the first time in more than 10 years.

The rate imbalance could spark an outflow of foreign capital, which accounts for over 30 percent of stock holdings in Asia’s fourth-largest economy.

The upcoming meeting is the first monetary board session since BOK Gov. Lee started his second term on April 2.


By Park Ga-young and newswires (gypark@heraldcorp.com)