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BOK holds key rate steady for 14th straight month as expected

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Published : 2014-07-10 09:54
Updated : 2014-07-10 09:54

South Korea's central bank on Thursday froze the policy interest rate at 2.5 percent for a 14th straight month, shrugging off a minority voice that forecast a rate cut as the confirmation of a pro-growth finance minister nominee is underway.

The decision by the monetary policy committee of the Bank of Korea (BOK) is in line with a poll conducted by Yonhap Infomax, the financial news arm of Yonhap News Agency. A majority of 21 of 22 analysts projected the central bank to hold the rate as economic indicators point to a modest economic recovery.

Asia's fourth-largest economy expanded 0.9 percent in the first quarter from three months earlier as shipments of technology and petrochemical products fueled exports. The figure matched a 0.9 percent on-quarter gain in the fourth quarter.

In a news conference following the monthly rate-setting meeting in June, BOK Governor Lee Ju-yeol said while the recovery was slightly dampened by sluggish domestic consumption hit by the mid-April Sewol ferry disaster, the current base rate of 2.5 percent is enough to support the economy.

The June 13 nomination of three-term ruling party lawmaker and former economic minister Choi Kyung-hwan, however, had stoked speculation that the BOK may lower the base rate in line with his plan to prop up sluggish domestic demand and the housing market.

Views that the central bank will trim its growth outlook for the second half lent further support to the rate cut scenario. The BOK is scheduled to announce its revised growth and inflation outlook for the second half later in the day.

The central bank's growth and inflation outlook for the year currently stands at 4 percent and 2.1 percent each, according to the latest revisions made in April. (Yonhap)

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