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Korea keeps base rate at 2% as economy forecast to have modest recovery
By Jennifer Chiou
New York, Feb. 17 – The Bank of Korea’s Monetary Policy committee decided to keep the base interest rate unchanged at 2% at its meeting on Tuesday. As noted, the rate was last cut from 2¼% in October.
According to a bank policy statement, the committee said that based on currently available information, although the trend of a solid economic recovery in the United States has been sustained, economic growth in emerging market countries, including China, has slowed.
The committee said that it expects that the domestic economy will show a modest trend of recovery going forward, but that the negative output gap will persist for a considerable time.
The bank added that while Korean exports have decreased due mainly to declines in the unit prices for example of petroleum products, it judges that the recovery of domestic demand has not been strong and that the sentiments of economic agents remain weak.
On the local employment front, the number of persons employed has expanded steadily, led by increases in the 50-and-above age group and in the service sector.
Despite increases in the extents of decline in petroleum product prices, consumer price inflation registered 0.8% in January, the same as in December, due mainly to an expansion in the scale of increase in prices of industrial products other than petroleum, the statement said.
Core inflation excluding agricultural and petroleum product prices rose sharply from 1.6% the month before to 2.4% in January.
Looking ahead, the committee forecasts that inflation will gradually rise from the second half of this year, after remaining at a low level.
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