BOK expected to hold fire on rates until July next year: report

Published : Oct 20, 2019 - 13:06 Updated : Oct 20, 2019 - 13:06

The Bank of Korea is expected to keep its key rate at a historic low until July next year as it maintained expectations of a modest economic recovery in 2020, according to a report Sunday.

But the BOK may have no choice but to cut the key rate next July unless the United States and China agree to end their lengthy trade war by that time, Goldman Sachs said in the report.

In a widely expected move, the BOK slashed the key rate to 1.25 percent from 1.5 percent last week, marking the second rate cut in three months.

Goldman Sachs said, "The next rate cut is likely to come after some time, possibly July 2020, assuming no resolution of the US-China trade war by that time."

BOK Gov. Lee Ju-yeol has said the central bank has "some room for additional easing," keeping the window of further rate cuts open.

(Yonhap)

South Korea's export-reliant economy is grappling with the trade war between the US and China, as well as sluggish consumption at home.

Exports fell for the 10th consecutive month in September. Some economists have warned that the nation's economy may fall into deflation after consumer prices declined 0.4 percent on-year last month, marking the first negative reading on record.

The International Monetary Fund recently cut its forecast of South Korea's economic growth to 2 percent this year, from an earlier forecast of 2.6 percent. (Yonhap)