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Korea maintains base rate at 1¼%; inflation forecast low, for now
By Wendy Van Sickle
Columbus, Ohio, July 14 – The Bank of Korea’s monetary policy board decided to maintain its base interest rate at 1¼%, the level where it set the rate in June after having previously been unchanged at 1½% since June 2015, according to a notice.
In forming its decision, the monetary policy board said it considered that the trend of economic recovery in the United States has been sustained and that the improvements in the euro area, although weak, have continued. Additionally, it said the Chinese economy has meanwhile maintained moderate growth. The board said it expects the global economy will maintain its weak recovery going forward, although it will be affected by factors including uncertainties related to Britain’s exit from the European Union, changes in monetary policies of major countries, and financial and economic conditions in emerging market countries.
Korean exports have continued to decline, while domestic consumption has continued to improve.
Consumer price inflation was at 0.8% in June, the same as in May. Core inflation ticked up to 1.7% last month from 1.6% in June.
The forecast calls for consumer price inflation to remain low for the time being, then gradually rise as the effects of the low oil prices diminish.
Domestic stock prices and the Korean won- dollar and Korean won-Japanese yen exchange rates temporarily fluctuated to large degree after the Brexit decision.
Long-term market interest rates have fallen considerably, largely because of declines in government bond rates in major countries, while household lending has sustained its substantial increase, led by mortgage loans.
As noted before, the bank lowered the rate to 1½% from 1¾% in June 2015 and to 1¾% from 2% in March 2015.
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