Bank of Korea stands pat for fifth meeting as inflation, growth ease

SOUTH Korea’s central bank on Thursday (Aug 24) held interest rates steady for a fifth straight meeting, as policymakers turn their attention to fine-tuning monetary settings amid softer inflation and slowing growth.

The Bank of Korea (BOK) said its seven-member monetary policy board voted to keep the base rate unchanged at 3.5 per cent, as it did on four previous meetings this year.

Domestic markets hardly budged as the decision was in line with the prediction from 43 economists surveyed by Reuters.

The BOK kept its economic growth expectation for this year at 1.4 per cent, unchanged from its May forecast, but cut next year’s to 2.2 per cent from 2.3 per cent. Inflation forecasts were unchanged, it said in a statement accompanying the rate decision.

The BOK has kept monetary policy unchanged since its last interest rate hike in January, and most economists believe the central bank is done with its tightening campaign which saw 300 basis points worth of hikes between August 2021 and January 2023.

South Korea’s annual consumer inflation has eased since peaking at a 24-year high of 6.3 per cent in July 2022. The rate stood at 2.3 per cent in July this year, still slightly higher than the central bank’s medium-term target of 2 per cent and is expected to rebound to the 3 per cent range in the next couple of months.

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Thursday’s policy decision comes as investors worry about a slowdown in Asia fourth-biggest economy, which is heavily reliant on trade, with consumer sentiment weakening in August for the first time in six months.

Softening global demand led by China’s sputtering economy, South Korea’s biggest export market, and a delayed recovery of the semiconductor industry have undercut some of the benefits from easing prices.

Policymakers are also concerned about rising household debt, which grew at its fastest pace in 1½ years in the second quarter, on rising mortgage demand. REUTERS