MNI REVIEW: BOK Keeps Rate Unch; Will Act To Support Economy

The Bank of Korea kept monetary policy unchanged on Wednesday, maintaining the base rate at a historic low of 0.5% but indicated it would act as needed to support the economy and stabilize the inflation rate.

The decision was flagged in MNI's preview published Tuesday.

"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," the BOK said in a statement.

"As the recovery in the Korean economy is expected to be slow and inflationary pressures on the demand-side are forecast to remain weak due to the Covid-19 pandemic, the Board will maintain its accommodative monetary policy stance," the central bank added.

Recent data showed exports rose in September, ending a slump due to demand for IT-related goods and automobiles but private consumption remained tepid following the rise in new Covid-19 infections.

UNCERTAINTIES

The impact of the second wave of infections on the economy has so far been limited and high-frequency data suggest more people are out and about.

Still, the outlook remains uneven as there are uncertainties about both exports and private consumption.

BOK Chairman Lee Juyeol in August said the bank has room for a rate cut although some board members voiced concerns about financial imbalances caused by easy policy.

There is speculation in financial markets that the BOK will expand unconventional measures to lower long-term interest rates in future, instead of resorting to rate cuts.

The next policy meeting is scheduled for Nov. 26.