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(LEAD) BOK freezes key rate at record low for 7th straight month

2016/01/14 11:04

(ATTN: UPDATES with excerpts from a statement released by BOK monetary policy board in paras 3-4, 10; ADDS photo)

By Byun Duk-kun and Oh Seok-min

SEOUL, Jan. 14 (Yonhap) -- In a widely anticipated move, the country's central bank kept its key rate frozen at a record low 1.5 percent for January on Thursday, extending its wait-and-see mode for another month ahead of another U.S. rate hike in the near future.

The Bank of Korea (BOK) has stood pat on its policy rate since July after four rate cuts in less than a year to help bolster growth in Asia's fourth-largest economy.

The BOK's rate-setting committee cited remaining uncertainties in the global market as a reason for its decision.

"We forecast that the global economy will maintain its recovery going forward, albeit at a moderate pace, centering on advanced economies such as the U.S., but judge that the possibilities exist of it being affected by factors such as the U.S. Federal Reserve's monetary policy normalization, Chinese financial market conditions, and international oil price movements," it said in a released statement.

Thursday's decision follows a U.S. rate hike in December, the first of its kind in nearly a decade.

The U.S. rate hike is well expected to prompt an outflow of foreign capital from emerging market countries, including South Korea. Foreign investors have remained net sellers of South Korean shares since Dec. 2.

The U.S. Fed has said it will continue to raise its key interest rate though the rate of the increase will be gradual. The U.S. Fed is set to hold another rate-setting meeting later in the month and again in March.

Bank of Korea Gov. Lee Ju-yeol attends the monthly rate-setting meeting of the Monetary Policy Board in Seoul on Jan. 14, 2016, where the board decided to hold the key rate frozen at record low 1.5 percent for January. Bank of Korea Gov. Lee Ju-yeol attends the monthly rate-setting meeting of the Monetary Policy Board in Seoul on Jan. 14, 2016, where the board decided to hold the key rate frozen at record low 1.5 percent for January.

Still, BOK Gov. Lee Ju-yeol has said the BOK will maintain its monetary easing stance at least for some time, citing sluggish economic growth and exports.

South Korea's exports dipped every single month in 2015 while an earlier report from the central bank said the country's growth potential has further slipped to the low 3-percent range for the 2015-2018 period from the mid 3-percent range in the 2011-2014 period.

"Looking at the Korean economy, although domestic demand activities have sustained their pace of recovery driven by consumption, the trend of declining exports has persisted while economic agents' sentiments have not improved," it said.

The BOK is set to release its latest outlook on economic growth later in the day. In its last quarterly revision, released October, the central bank slashed its growth outlook for 2016 to 3.2 percent from 3.3 percent.

Meanwhile, the BOK's decision to freeze its key rate is in line with an earlier poll by Yonhap Infomax, the financial news arm of Yonhap News Agency, in which 15 out of 17 economists surveyed projected a rate freeze for January.

bdk@yna.co.kr

graceoh@yna.co.kr

(END)

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