BOK to freeze key rate for 10th month in March: poll

By 정주원
  • Published : Mar 11, 2014 - 13:13
  • Updated : Mar 11, 2014 - 13:13
South Korea's central bank is expected to freeze the key interest rate for the 10th consecutive month for March as the local economy is recovering amid tame inflation, a poll showed Tuesday.

All 14 analysts surveyed by Yonhap Infomax, the financial news arm of Yonhap News Agency, forecast that the Bank of Korea will leave the benchmark seven-day repo rate unchanged at 2.5 percent on Thursday.

The March meeting will mark the last rate-setting session for Gov. Kim Choong-soo as his four-year term expires at the end of this month. Lee Ju-yeol, a former senior deputy governor at the BOK, will replace Kim from April if he passes a parliamentary confirmation hearing.

"The Korean economy is seen as being on the modest recovery track, but consumer inflation is still low and uncertainty over the global economy lingers, which would make it difficult for the BOK to change its monetary policy stance," said Ma Ju-ok, an economist at Kiwoom Securities Co.

The Korean economy is recovering while inflationary pressure remains low. Asia's fourth-largest economy is expected to grow 3.8 percent this year after advancing 2.8 percent last year, according to the central bank.

In the fourth quarter, the local economy grew 0.9 percent on-quarter, slowing from a 1.1 percent on-quarter gain three months earlier.

The country's consumer prices grew 1 percent in February from a year earlier, slowing from a 1.1 percent on-year gain in January, according to a government report. It marked the fourth straight month that the growth has stayed in the 1 percent range and the consumer inflation ran below the BOK's 2.5 percent to 3.5 percent inflation target band for the 21st straight month in February.

Experts said that the BOK's monetary policy stance is not likely to sharply change under the incoming governor's leadership as economic conditions at home and abroad would lead the BOK to stay on course for the time being.

"I believe that the BOK will begin hiking (the key rate) in the second half of this year -- most likely in the late third quarter or in the early fourth quarter when output gap will have narrowed substantially or even turned positive," said Waiho Leong, a senior economist at Barclays Capital.

In the poll, five analysts said that the bank will likely raise the borrowing costs later this year while seven experts forecast the BOK to leave the key rate unchanged until the end of this year. Two analysts said a rate cut is expected to support the growth, the survey showed. (Yonhap)