Korea keeps base rate at 1½%, says inflation rises to 1% in November

By Angela McDaniels

Tacoma, Wash., Dec. 10 – The Bank of Korea’s monetary policy board decided at a meeting on Thursday to keep its base interest rate unchanged at 1½%, according to a bank policy statement.

The board forecasts that the global economy will maintain its recovery going forward, albeit at a moderate pace, but it judges that the recovery may be affected by heightened international financial market volatility, due for example to a shift in the U.S. Federal Reserve’s monetary policy, and by the weakening of economic growth in emerging market countries.

Looking at the Korean economy, the board said domestic demand activities have sustained their paces of recovery, but the trend of declining exports has persisted and the improvement in economic agents’ sentiments has been “inadequate.”

The board forecasts that the domestic economy will continue its recovery going forward, centering on domestic demand activities, but in view of external economic conditions judges the uncertainties surrounding the growth path to be high.

Consumer price inflation rose to 1% in November from 0.9% in October. The board attributed this mainly to a narrowing of the scale of decline in petroleum product prices and to expansions in the extent of increases in service fees.

Core inflation excluding agricultural and petroleum product prices rose to 2.4% in November from 2.3% in October.

Looking ahead, the board forecasts that inflation will continue at a low level, due mainly to the effects of low oil prices.

In the South Korean financial markets, influenced mostly by expectations of a policy rate hike by the U.S. Federal Reserve, stock prices have fallen, long-term market interest rates have risen, the Korean won has depreciated against both the dollar and the Japanese yen, and bank household lending has sustained a trend of increase at a level substantially exceeding that of recent years, led by mortgage loans, according to the board.

As previously reported, the bank lowered the rate to 1½% from 1¾% in June and to 1¾% from 2% in March.

© 2015 Prospect News.
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