[Courtesy of Bank of Korea]
The Bank of Korea (BOK) held its base rate unchanged at 1.5 percent for a seventh straight month on Thursday, as widely expected, amid growing uncertainties about economic recovery.
The central bank’s monetary policy board said in statement “ the domestic economy will continue its recovery going forward, centering around domestic demand activities, but in view of external economic conditions judges the uncertainties surrounding the growth path to be high."
"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 external risk factors such as any changes in the US Federal Reserve’s monetary policy or in financial and economic conditions in China, the movements of capital flows, and the trend of increase in household debt." it added.
A growing number of analysts now see the central bank taking time and holding rates steady for the rest of the year to observe the effects of the U.S. rate hike and additional policy moves that may follow.
"I expect the central bank to keep interest rates steady throughout this year. Even though the bank cut interest rates four times already last year, household debt has been increasing continuously, which means there wasn't much impact from interest rate decisions. It is not practically useful to cut interest rate." an analyst at Kiwoom Securities said.
South Korea's top financial regulator said on Thursday it sees a slight slowing in household debt growth in 2016 thanks to government steps set to be enforced this year as well from an expected rise in borrowing costs stemming from higher U.S. rates.
The Financial Services Commission (FSC) said in a statement "The speed of household debt growth is expected to slow slightly due to tightened bank screening measures and the U.S. rate hike," it said.
By Alex Lee
reporter
Park Sae-jin
swatchsjp@ajunews.com
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