Bank of Korea Holds Policy Interest Rate at 2.75%

March 14, 2013

Defying expectations of a cut, monetary officials did not change their seven-day repo rate.  Such was the fifth consecutive meeting without a cut, and as in February, the decision was not a unanimous one.  After five 25-bp rate hikes between June 2010 and June 2011, the key rate was cut by 25 basis points in July as well as October of 2012.  A statement released today appraises Korea’s economy “to have sustained a weak level of growth” and asserted “no change to the Committee’s forecast that the domestic economy will show a negative output gap for a considerable time.”  Total and core consumer price inflation in February were at 1.4% and 1.3%, and “inflation appears likely to remain relatively low, due to the weakening of demand-side pressures,” albeit on a rising trend.  Officials continue to watch the won closely and to monitor geopolitical risk as well as financial and economic conditions.    Analysts still foresee a reasonable likelihood of a third rate reduction in coming months.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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