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BOK expected to freeze key interest rate until mid-2018

South Korea's central bank is expected to maintain its key interest rate at a record low until mid-2018, according to an economist at Goldman Sachs on Saturday, after the Bank of Korea hinted that it may keep a dovish tone.


Goldman Sachs economist Kwon Goo-hoon also expected the nation's inflation rate to slow down as prices of raw materials are predicted to fall off.

This week, the central bank announced it will keep its policy rates at the present record-low of 1.25 percent for a 13th consecutive month, even though it upgraded the nation's growth outlook to 2.8 percent from a previous forecast of 2.6 percent.

BOK Governor Lee Ju-yeol did note the sluggish job market and weak recovery in household income as a source of concern.

Kwon said Lee's stance on monetary policy has not changed by and large.

The gap in key interest rates between South Korea and the United States is likely to be reversed if the Federal Reserve raises interest rates to a range of 1.25 percent to 1.5 percent by the end of this year.

Still, most analysts expect the country's rate to hold steady for the time being, since a hike could put pressure on households that took out loans, mostly to buy homes. The level of household debt has risen sharply over the years that can pose serious challenges to the economy going forward. (Yonhap)

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