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Free AccessMNI China Daily Summary: Wednesday, December 11
MNI: STATE OF PLAY: Bank Of Korea May Hike After October Pause
The Bank of Korea on Tuesday signalled that it could move from October's pause on the path to interest rate normalisation and "appropriately adjust the degree of monetary policy accommodation" at the next meeting in November.
As expected, the BOK held its policy interest rate at 0.75% as it monitors pandemic conditions, but said the Korean economy is expected to continue its sound growth, and inflation to run above 2% for some time, despite ongoing uncertainties over the virus."
EVOLVING RISKS
The focus for the central bank is shifting to evolving risks that could prompt the BOK to raise the policy rate at the Nov. 25 meeting. One senior analyst had expected the bank to hike this time because of inflation and other risks, and the statement highlighted many of the same risks ahead.
"In this process the board will judge when to further adjust the degree of accommodation while thoroughly assessing developments related to COVID-19, changes in the pace of growth and inflation, the risk of a buildup of financial imbalances, and monetary policy changes in major countries," the BOK said.
Consumer price inflation will run at the mid-2% level "for some time, exceeding the path projected in August, before declining somewhat," the BOK said. "Core inflation is forecast to increase to around the upper-1% level."
OUTLOOK MAINTAINED
The BOK maintained its stance that higher rates are needed to cope with financial imbalances such as high house prices and rising personal debt, warning that an "increase in household loans remains at a high level, and housing prices have continued to increase rapidly in all parts of the country."
The BOK said expects gradual further improvement in private consumption as vaccination rates rise, which should combine with a supplementary budget, and solid exports and investment for projected GDP growth of "around 4% this year, consistent with the forecast in August."
"The board sees global economic growth and global financial markets as likely to be affected largely by the severity of the resurgence of Covid-19 and the status of vaccine distribution, as well as by global inflation movements and monetary policy changes in major countries."
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Why MNI
MNI is the leading provider
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