MNI REVIEW: BOK Holds Rate at 0.5%; Will Act For Economy

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

The decision had been widely expected, as seen in MNI's preview published Monday.

The next policy meeting is scheduled in January 2021, but the BOK did not release the meeting dates for next year.

TO ACT FOR ECONOMY

"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," today's BOK statement said.

"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."

WEAK PRIVATE CONSUMPTION

The Korean economy has continued to recover at a modest pace. Although the recovery in private consumption has been slow and the correction in construction investment has continued, facilities investment has started to recover and the improvement in exports has continued.

"Going forward, the economy is likely to recover gradually, led mainly by exports and investment. However, uncertainties surrounding the economic outlook are judged to remain elevated. GDP is projected to grow at slightly below -1% in 2020 and around 3% in 2021," the BOK said.

Consumer price inflation has slowed to the lower -0% level due to the sharp decline in the prices of public services.

It is forecast that consumer price inflation and core inflation will run at the low-to mid -0% level for some time and then moderately increase to around 1% in 2021.