BOK expected to cut growth forecast again

[THE INVESTOR] The Bank of Korea may lower its economic growth forecast again, and maintain the key rate at 1.25 percent.

The central bank is set to hold a Monetary Policy Committee meeting on July 14, and announce a new growth forecast, and pundits say that the 2.8 percent target is likely to be lowered.

BOK Gov. Lee Ju-yeol stated after last month’s meeting that the slowdown in global trade is bigger than initially anticipated, and that risks arising from corporate restructuring is likely to grow in the second half of the year. 

Monetary Policy Committee members have also said that the target of 2.8 percent is unlikely.

If the BOK lowers the target, it will be the fourth time the central bank makes such changes since October 2015. In October, bank forecast a growth of 3.2 percent, which was lowered to 3 percent in January, and again to 2.8 percent in April.

However, market watchers say that a big change is unlikely, saying a cut of 0.1 to 0.2 percentage points are likely in light of the government’s stimulus plans.

As for the benchmark rate, the BOK is widely expected to keep the figure at 1.25 percent.

A survey conducted by the Korea Financial Investment Association showed that 91.2 percent of bond market specialists expect the rate to be unchanged.

The association said that the central bank is likely to keep the rate unchanged over concerns on growing household debt. The association also said that the rate cut in June is another factor that will influence the BOK’s decision.

By Choi He-suk (cheesuk@heraldcorp.com)