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Korea keeps base rate at 1½%, says inflation fell to 1% in March
By Angela McDaniels
Tacoma, Wash., April 19 – The Bank of Korea’s monetary policy board decided at a meeting on Tuesday 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 factors such as financial and economic conditions in emerging market countries, international oil price movements and global financial market volatility.
Looking at the Korean economy, the board said the trend of declining exports has continued, but domestic demand activities and the sentiments of economic agents appear to be improving somewhat. The board forecasts that the domestic economy will show a trend of modest improvement going forward, centering on domestic demand activities, but in view of external economic conditions judges the uncertainties surrounding the growth path to be still high.
Consumer price inflation fell to 1.0% in March from 1.3% in February. The board attributed this mainly to an increase in the extent of decline in petroleum product prices. Core inflation excluding agricultural and petroleum product prices declined slightly to 1.7% in March from 1.8% in February.
Looking ahead, the board forecasts that consumer price inflation will fall “considerably short” of the 2% inflation target for the time being, due mainly to low oil prices.
In the South Korean financial markets, stock prices have risen and the Korean won has appreciated against the dollar since March as foreigners’ securities investment funds have recorded net inflows on the effects of further monetary policy easing by major countries, and long-term market interest rates have fallen, according to the board.
As previously reported, the bank lowered the rate to 1½% from 1¾% in June 2015 and to 1¾% from 2% in March 2015.
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