Bank of Korea Governor Lee Ju-yeol and senior officials discuss whether or not to lower the benchmark rate during a meeting at the central bank in Seoul, Thursday. The BOK decided to keep the rate unchanged at 1.25 percent. Photo courtesy of Bank of Korea

Central bank freezes benchmark rate

The Bank of Korea (BOK) slashed the country’s 2020 growth outlook to 2.1 percent from 2.3 percent, citing the woes on the economic fallout of the novel coronavirus, COVID-19.

Earlier this month, global rating agency Moody’s trimmed down its forecast for South Korea to 1.9 percent from 2.1 percent. Nomura Securities also expected that the country’s economy would expand only 1.8 percent year-on-year.

However, the Monetary Policy Board of the central bank froze the benchmark rate at 1.25 percent, defying expectations of a 0.25-percentage-point cut to underpin the sluggish economy.

The Korea Financial Investment Association surveyed experts in the fixed-income market this month to find more than 80 percent of respondents expect a downward revision.

As the BOK envisions the negative impact of the coronavirus outbreak, it is expected to lower the rate in its next meeting slated for April.

As it is expected that domestic economic growth will be moderate and it is forecast that inflationary pressures on the demand side will remain at a low level, the Board will maintain its accommodative monetary policy stance,” the BOK said in a statement.

In this process, it will judge whether to adjust the degree of monetary policy accommodation, while thoroughly assessing the severity of the of the COVID-19 outbreak, its impact on the domestic economy, and changes in financial stability including household debt growth.”

Experts also projected that the BOK will lower the key rate two months later.

From the perspective of the central bank, it would want to check how the government will deal with the situation before taking specific measures,” Shinyoung Securities economist Cho Young-gu said.

As it has already cut its 2020 growth outlook, it is projected to trim down the benchmark rate in April.”

On Thursday, South Korea saw the confirmed cases of COVID-19 infections near 1,600. It has the most number of confirmed cases outside China, where the outbreak was first reported last December.


This article is provided by UPI News Korea. _ ED.