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BOK freezes policy rate at 1.25% amid hope of economic recovery

South Korea’s central bank maintained the country’s base interest rate at 1.25 percent, prolonging its wait-and-see approach amid mounting expectations of an economic recovery this year.

Bank of Korea Gov. Lee Ju-yeol chairs the Monetary Policy Board meeting Friday. (Yonhap)
Bank of Korea Gov. Lee Ju-yeol chairs the Monetary Policy Board meeting Friday. (Yonhap)

The Bank of Korea’s Monetary Policy Board announced Friday that the key rate will be kept at the record low of 1.25 percent, largely conforming to market expectations.

The rate-setting board carried out two rate cuts last year, reducing by 0.25 percentage point each time, in July and October.

In a survey conducted early this month by the Korea Financial Investment Association on 200 market experts, 99 percent of respondents predicted a rate freeze.

“External uncertainties and concerns on low growth continue, but there are also escalating expectations on economic recovery, given the improvement in leading economic indicators and some key indexes such as exports,” it said in a release.

The state-run Korea Development Institute think tank, in its economic trend report last week, also suggested that Asia’s fourth-largest economy is likely to phase out of slow growth.

The most conspicuous variable in Seoul’s decision was the “phase one” trade deal recently signed by the US and China, which has let some of the heat out of the prolonged tensions between the world’s two largest economies.

In the domestic sector, the Moon Jae-in administration’s heavy-handed loan restrictions to curb housing prices have also made it difficult for monetary policymakers to take easing actions.

On Dec. 16, the government unveiled another set of comprehensive real estate regulations, focusing on banning or restricting mortgage loans for speculative homebuyers.

By Bae Hyun-jung (