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BOK to keep monetary easing in 2021 to support economic recovery

The Bank of Korea (Yonhap)
The Bank of Korea (Yonhap)
The Bank of Korea (BOK) said Friday it will maintain an accommodative monetary policy next year to help the nation's economic recovery from the pandemic, but it will closely watch the side-effects of monetary easing.

"Under the direction of its monetary policy in 2021, the Bank of Korea will maintain the easing stance of its monetary policy to support the recovery in growth and to ensure the rise in consumer prices will be stabilized at around the target level," the BOK said in a statement.

Next year, the BOK said it will "effectively" operate its loan program to support small- and medium-sized firms hit by the pandemic.

The BOK will also take its "market stabilization measures" in foreign exchange and financial markets in a timely manner, while seeking to sign currency swap deals with central banks of other countries, according to the statement.

The global economy is expected to show a "modest recovery" next year, helped by progress in vaccine developments and stimulus measures by advanced economies, the BOK said.

South Korea's economy is likely to grow at around 3 percent next year, but uncertainties remain due to a global resurgence of the virus, the BOK said.

The BOK's monetary policy direction also came as the country's consumer prices are expected to rise 0.5 percent from a year earlier in 2020.

The BOK expects consumer prices to grow 1 percent next year, but that too will fall far short of its long-term target of 2 percent.

Last month, the BOK held its policy rate unchanged at a record low of 0.5 percent, while slightly revising up this year's economic outlook, amid growing concerns over the nation's third wave of coronavirus infections.

Driven by signs of a modest recovery in exports, the BOK revised up this year's economic growth outlook to a 1.1 percent contraction, compared with a previous forecast of a 1.3 percent retreat.

The BOK expected the economy to grow 3 percent next year, faster than a previous forecast of 2.8 percent expansion for 2021. (Yonhap)

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