Bank of Korea Leaves Interest Rate the Same but Reduces 2019 Growth and CPI Forecasts

April 18, 2019

As expected, the Bank of Korea’s 1.75% base rate was left unchanged. This represents an “accommodative” stance, according to a released statement. Officials argue that “it is expected that the domestic economy will continue to grow at a rate that does not diverge significantly from its potential level, and it is forecast that inflationary pressures on the demand side will not be high.” To wit, revised forecasts accompanying this scheduled review of monetary policy bumped projected growth this year down 0.1 percentage point to 2.5% and projected CPI inflation down 0.3 percentage points to 1.1%.

The Bank of Korea implemented previously a pair of 25-basis point rate hikes in November 2017 and November 2018. Not only does it look increasingly like there will not be a third increase this year, but speculation has in fact risen that the next change may in fact be a cut. Prior to the two aforementioned base rate increases, five reductions, all also by 25 bps, were engineered from March 2014 to June 2016.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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