Bank of Korea holds fire again on rates, trims growth forecast

SOUTH Korea’s central bank held interest rates steady for a third meeting on Thursday (May 25), as expected, after a one-and-a half-year-long tightening cycle and as both inflation and economic growth eased.

The Bank of Korea (BOK) announced its seven-member monetary policy board voted to keep its policy rate unchanged at 3.5 per cent, without elaborating. Governor Rhee Chang-yong is due to hold a news conference soon.

The decision matched the prediction from all 40 economists surveyed by Reuters. Most of the respondents forecast the next rate change would be a cut, probably during the final quarter of this year.

The BOK started raising interest rates in August 2021 to tame inflation, well before the world’s other major central banks, and had raised them by a total of 300 basis points through January this year.

The BOK also announced it cut this year’s economic growth forecast to 1.4 per cent from 1.6 per cent forecast in February, while keeping its inflation projection unchanged at 3.5 per cent.

Rhee has indicated on several occasions that the central bank’s growth forecast will likely be lowered.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Asia’s fourth-largest economy has cooled on sluggish exports and narrowly averted recession in the first quarter. Inflation has slowed since peaking in July last year, but still stands far above the central bank’s 2 per cent target.

Fresh data showed on Thursday the annual producer inflation rate halved in April to 1.6 per cent from 3.3 per cent in March, touching its lowest in more than two years, underscoring a broad view of sustained easing of inflation pressure. REUTERS