South Korea’s central bank is likely to freeze the key interest rate for the eighth straight month for January as the local economy is on the recovery track amid tame inflation, a poll showed Tuesday.
All 16 analysts surveyed by Yonhap Infomax, the financial news arm of Yonhap News Agency, forecast that the Bank of Korea (BOK) will leave the benchmark seven-day repo rate unchanged at 2.5 percent on Thursday. Experts said that the local economy is on the moderate recovery track while inflationary pressure remained subdued.
“The BOK is likely to keep its current stance at least until the first half, given the trend of the economic recovery at home and abroad,” said Yoon Yeo-sam, a fixed-income analyst at KDB Daewoo Securities Co. Yoon said that some raised the need to cut the key rate, citing the low price movement, but as the central bank and the government downplayed concerns about deflation, a rate cut is not likely.
The Korean economy grew 1.1 percent on-quarter in the third quarter and consumer prices ran below the BOK’s 2.5-3.5 percent inflation target band for the 19th straight month in December.
Analysts said that the Federal Reserve’s recent decision to taper its bond-buying monetary stimulus also seemed to put the BOK on a wait-and-see mode.
Last month, the Fed announced its decision to start reducing its monthly bond purchases by US$10 billion to $75 billion from January, citing a stronger job market.
Most analysts forecast that the central bank would hold the benchmark rate before raising it later this year, but there are still minority voices for a rate cut in the market, citing the won’s appreciation. (Yonhap News)
