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Korea cuts base rate to 1¾% as exports, CPI, core inflation decrease
By Tali Rackner
Norfolk, Va., March 12 – The Bank of Korea’s Monetary Policy committee decided to lower the base interest rate by 25 basis points to 1¾% from 2% at its meeting on Thursday, according to a bank policy statement. The rate was last cut from 2¼% in October.
The committee said that based on current information, although the trend of a solid economic recovery in the United States has been sustained and improvements, albeit modest, have also continued in the euro area, economic growth in emerging market countries, including China, has slowed.
The committee said it expects that the global economy will sustain its modest recovery going forward, centering on advanced economies like the United States, but believes that the possibility exists of its being affected by changes in the monetary policies of major countries, by the weakening of economic growth in emerging market countries and by geopolitical risks.
The bank added that Korean exports have decreased, mostly due to declines in the unit prices for petroleum products, that domestic demand activities such as private consumption and facilities investment have exhibited sluggish movements and that the sentiments of economic agents have also not clearly recovered.
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.
Consumer price inflation fell to 0.5% in February from 0.8% in January, mainly due to increases in the extents of decline in petroleum product prices and to the slower paces of increase in prices of industrial products other than petroleum.
Core inflation excluding agricultural and petroleum product prices dropped slightly to 2.3% from 2.4% in January.
Looking ahead, the committee said it forecasts that inflation will continue at a level lower than originally expected due mainly to the effects of the low oil prices.
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