South Korea’s central bank froze its key rate for the ninth straight session Thursday amid woes over slower-than-expected inflation moderation and high household debts.
In a widely expected decision, the monetary policy board of the Bank of Korea (BOK) kept its policy rate unchanged at 3.5 percent, according to South Korea’s News Agency (Yonhap).
The BOK’s rate freeze came in the face of rising woes over project financing developments, which could wreak havoc on financial institutions and further sap domestic demand. The rate freeze took place as South Korea’s economy has shown signs of a recovery in exports while consumer spending still remains sluggish amid easing inflationary pressure.
Last year, the economy was expected to grow 1.4 percent, meeting the central bank’s estimate. But its expansion slowed from the previous year’s 2.6 percent gain and the 4.1 percent advance in 2021.
For the year, the central bank maintained its growth forecast at 2.1 percent and kept its inflation outlook at 2.6 percent. However, the economy is facing headwinds, such as a slump in the property market and high household debts.
Policymakers are also pinning hopes on easing inflation, although the pace of a slowdown is expected to be slower than expected. The country continued to experience high inflationary pressure last year following the sharpest inflation in decades in 2022.
The BOK has stood pat following rate freezes last February, April, May, July, August, October, November and January. The rate freezes came after the BOK delivered seven consecutive rate hikes from April 2022 to January 2023.
Source: www.qna.org.qa
