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Korea keeps base rate at 1¾%; inflation unchanged from March at 0.4%
By Angela McDaniels
Tacoma, Wash., May 15 – The Bank of Korea’s Monetary Policy committee decided at a meeting on Friday to keep the base interest rate unchanged at 1¾%, according to a bank policy statement.
The bank last lowered the rate by 25 basis points to 1¾% from 2% in March.
Looking at the Korean economy, the committee said the sentiments of economic agents have improved, the unemployment rate remains at the same level as that during April 2014, and the domestic economy is expected to experience a modest trend of recovery going forward, although the committee expects the negative output gap to persist for a considerable time.
Despite a narrowing of the extent of decline in agricultural and petroleum product prices, consumer price inflation was 0.4% in April, the same as in March, as the rate of increase in prices of industrial products slowed, according to the statement. Core inflation excluding agricultural and petroleum product prices fell to 2.0% from 2.1% in March.
Looking ahead, the committee forecasts that inflation will continue at a low level, due mainly to the effects of the low oil prices.
In the Korean financial markets, long-term market interest rates have risen, due in large part to sharp rises in interest rates in major countries and to increased issuance of bonds. Stock prices have also risen, chiefly on net purchases of domestic stocks by foreigners, the committee said.
The committee said it will closely monitor external risk factors such as international oil prices and shifts in major countries’ monetary policies as well as developments related to the spare capacity in the domestic economy and the trends of household debt and capital flows.
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