Bank of Korea holds Rate at record low

By Park Sae-jin Posted : November 12, 2015, 13:35 Updated : November 13, 2015, 14:28

Bank of Korea holds rate at record low[Courteosy of Bank of Korea]



As widely expected, The Bank of Korea (BoK) kept interest rates steady on Thursday for a fifth straight month, reflecting growing global uncertainty ahead of an anticipated U.S. rate hike in December.

After keeping the key rate at the record low of 1.5 per cent, the central bank ’s monetary policy board said, "in the coming months the Korean economy is expected to gradually improve, albeit at a moderate pace, owing mainly to an improvement in consumer sentiment and to the effects of government policies."

"Looking ahead, while working to sustain the recovery of economic growth, the Board will conduct monetary policy so as to maintain price stability over a medium-term horizon and pay attention to financial stability. In this process it will closely monitor the trend of increase in household debt and external risk factors such as any changes in the US Federal Reserve’s monetary policy or in economic conditions in emerging market countries including China, as well as the trends of capital flows,” the bank said in a statement.

"The Board forecasts that the global economy will maintain its recovery going forward, albeit at a moderate pace, centering around advanced economies such as the US, but judges that the possibilities exist of its being affected by heightened international financial market volatility due for example to a shift in the U.S. Federal Reserve’s monetary policy, and by the weakening of economic growth in emerging market countries."

Bank of Korea governor Lee Ju-yeol said in a news conference that “The decision to keep rates unchanged on Thursday was unanimous."

"Our decision was made as we believe the volatility in interest rates inside and outside the country can increase. We plan to keep our policy rate accommodative,” he said.

Lee also said, "the economic recovery in South Korea is expected to continued focused on domestic consumption, but uncertainties in its path are high due to offshore situations."

The Bank of Korea has expressed confidence that South Korea's fundamentals like its massive current account surplus and foreign reserves will be strong enough to weather the effects of the U.S. rate hike when and after it happens.

However, it has not fully ruled out the risk that South Korea may be affected by other emerging economies being thrown into shock after the move.

Due to the Fed's looming decision in December, most analysts who previously viewed a Korean rate cut now see it happening next year after uncertainties offshore have subsided.

By ALEX LEE
 
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