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Bearish Cycle Still In Play


The Bank of Korea kept monetary policy settings unchanged on Friday, maintaining the Base Rate at the historic low of 0.5% but indicating that the bank was prepared to act to support the economy and stabilize the inflation rate if required.

The decision had been widely expected, as seen in MNI's preview published Wednesday. The next policy meeting is scheduled on February 25.


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."

"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 will maintain its accommodative monetary policy stance," the BOK said.

"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."


As for the economic climate, the BOK statement said: "The Korean economy has continued to recover modestly. Although private consumption has contracted due to the recent coronavirus resurgence, facilities investment has continued to recover and export growth has increased, led by the IT sector."

"The economy is likely to recover gradually, led by exports and investment. However, uncertainties surrounding the economic outlook are judged to remain elevated. GDP growth this year is projected to be around 3.0%, generally consistent with the November forecast."

The BOK warned that "household loan growth has remained high and housing prices have accelerated in all parts of the country."

MNI Sydney Bureau | +61-405-322-399 |