BoK Review

The Bank of Korea kept monetary policy unchanged, maintaining the base rate at the historic low of 0.5%, but the central bank said it was prepared act to support the economy and stabilize the inflation rate. The decision was reached unanimously, and was expected by all analysts surveyed.

• A statement released by the BOK said: "The Board will continue to conduct monetary policy in order to support the economy and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability."
• It also said that as the recovery in the Korean economy is expected to be modest and inflationary pressures on the demand side are forecast to remain weak, the Board would "maintain its accommodative monetary policy stance."
• "In this process the Board will thoroughly assess developments related to Covid-19 as well as the effects of the policy measures taken in response to the pandemic, while paying attention to changes in financial stability conditions such as fund flows to asset markets and household debt growth," the BOK said.
• As for the economic climate, the BOK said: "The Korean economy has continued to recover modestly. Although private consumption has remained weak as social distancing has been prolonged, exports have sustained their buoyancy led by the IT sector and facilities investment has continued to recover."
• But it warned that labor market conditions have remained weak, as the number of people employed declined sharply compared to the corresponding period last year.
• "Going forward, the economy is likely to continue its recovery, led by exports and investment. However, uncertainties surrounding the pace of recovery are judged to remain elevated. GDP growth this year is projected to be around 3.0%, generally consistent with the November forecast," the BOK said.
• The bank did upgrade inflation forecasts, citing the global economic recovery and higher energy prices.