MNI STATE OF PLAY: BOK Holds Rates; Lifts GDP, CPI Forecasts

The Bank of Korea held the base rate at the historical low of 0.5% citing uncertainties around covid and modest price pressures from demand even as it raised its growth and inflation forecasts for the year.

While the domestic recovery is expected to strengthen and inflation would remain high for some time, the board will maintain its accommodative stance as "there are underlying uncertainties surrounding the path of COVID-19 and inflationary pressures on the demand side are forecast to be modest," the bank said in its statement following the decision.

The bank now forecasts GDP growth for the year at 4%, above the February forecast of 3%. It expects consumer price inflation in the high 1% range, exceeding the February forecast of 1.3%. "Core inflation is forecast to run at the lower 1% range," the bank said.

DEBT, ASSETS

The BOK said the domestic recovery is likely to strengthen due to the buoyancy of exports and investment as well as the improvement in private consumption.

The bank added it will continue to support the economy and stabilise consumer price inflation at the target level over the medium-term, while paying attention to the build-up of financial imbalances such as through fund flows in asset markets and household debt growth.

The next policy meeting is scheduled for July 15.