South Korea Leaves Monetary Policy Unchanged

The Bank of Korea left its base rate steady for the fifth straight month at record low of 1.25 percent at its November meeting, as expected. While forecasting consumer prices in the economy will gradually rise, mainly due to the weakening influence of the low oil prices, policymakers said they will closely monitor the uncertainties in domestic and external conditions, any changes in the monetary policy of the US Federal Reserve, and the trend of increase in household debt.

Excerpts from the statement by the Bank of Korea:

Looking at the Korean economy, exports have continued their trend of decline while the improvements in domestic demand activities appear to have weakened a bit. On the employment front, the employment-to-population ratio in October was slightly higher than that in October of last year, as the number of persons employed increased. The unemployment rate meanwhile rose somewhat. The Board forecasts that the domestic economy will sustain its trend of modest growth going forward, in line with  a recovery of the global economy, but in view of recent changes in domestic and external conditions judges the uncertainties surrounding the growth path to have increased further.

Consumer price inflation rose from 1.2 percent the month before to 1.3 percent in October, owing chiefly to the expiration of a temporary cut in electricity fees. Core inflation excluding agricultural and petroleum product prices also rose to 1.5 percent, from 1.3 percent in September. In the housing market, the extents of increase in sales and leasehold deposit prices have expanded, centering around the Seoul area. Looking ahead the Board forecasts that consumer price inflation will gradually rise, due mainly to the weakening influence of the low oil prices.

In the domestic financial markets since October, influenced mainly by strengthened expectations of a policy rate hike by the US Federal Reserve, and by the result of the  US presidential election, long-term market interest rates and the Korean won-US dollar exchange rate have risen to large extents and stock prices have declined. The Korean won-Japanese yen exchange rate has fallen slightly. Household lending has sustained a trend of substantial increase at a level exceeding that of recent years, led by mortgage loans.

Looking ahead, the Board will conduct monetary policy so as to ensure that the recovery of economic growth continues and consumer price inflation approaches the target level over a medium-term horizon, while paying attention to financial stability. 

South Korea Leaves Monetary Policy Unchanged

Bank of Korea l Rida Husna |
11/11/2016 1:57:54 AM