Bank of Korea Gov. Rhee Chang-yong bangs the gavel at a monetary policy meeting held at the bank's headquarters in central Seoul, Thursday. (Joint Press Corps)
Bank of Korea Gov. Rhee Chang-yong bangs the gavel at a monetary policy meeting held at the bank's headquarters in central Seoul, Thursday. (Joint Press Corps)

The Bank of Korea forecast a limited recovery for Asia’s fourth-largest economy, raising the country’s growth rate by 0.1 percentage point to 0.9 percent on Thursday.

While holding its interest rate steady, the central bank also increased its projection for this year's gross domestic product growth from 0.8 percent to 0.9 percent, factoring in the effects of the latest extra government spending.

The forecast aligns with the Finance Ministry’s projection released on Aug. 22.

Meanwhile, the BOK opted to keep its key policy rate unchanged at 2.5 percent, citing continued risks in the housing market, following a rate freeze in July.

The prolonged pause comes after two rate cuts earlier this year, totaling 0.5 percentage points, aimed at supporting a slowing economy.

"While the housing market in the Seoul metropolitan area and the pace of household debt growth have somewhat eased following the regulatory measures implemented on June 27, home prices in certain parts of Seoul continue to rise sharply and it remains necessary to monitor whether the market is moving toward sustained stabilization," BOK Gov. Rhee Chang-yong said during a briefing to the National Assembly’s Strategy and Finance Committee on Aug. 19.

The weak valuation of the Korean won against the dollar also remains a concern for the BOK. With a rate differential of up to 2 percentage points between Korea and the US, the local currency has hovered around 1,400 won per dollar.

With the BOK’s decision now in place, attention turns to the upcoming Federal Open Market Committee meeting scheduled for Sept. 16–17. The US Federal Reserve does not hold a policy-setting meeting in August.


silverstar@heraldcorp.com