Bank of Korea holds key interest rate steady at 1.50%
- 5 years ago
As widely expected, South Korea's central bank today decided to freeze its key rate for the month of August.
Kim Hyesung reports.
The Bank of Korea on Friday kept its benchmark interest rate unchanged at 1-point-five percent .
This comes after the bank cut rates by a quarter of a percentage point last month citing a slowing economy, in what was its first cut in three years.
Growing uncertainties over the on-going U.S.-China trade dispute and Japan's export restrictions on South Korea have put pressure on the bank to cut rates, but a back-to-back rate cut might signal that the economy is in crisis, prompting the bank to keep rates steady for August.
The last consecutive cuts occurred during the global financial crisis.
Also, the South Korean won has weakened by over 8 percent against the U.S. dollar this year to more than 12-hundred won against the greenback, so cutting rates too soon could knock the won even lower, creating capital flight risks.
But a rate cut is expected in October or November this year as data shows the domestic economy remains sluggish.
Exports, a key driver of South Korea's economic growth, are set for a contraction for the ninth consecutive month on weak global demand.
For the first 20 days in August, exports tumbled 13 percent on-year to less than 25 billion dollars with chip sector shipments plunging 30 percent.
Consumer sentiment is at a 31-month low this month, and headline inflation remained below one percent through July, lower than the bank's two percent target.
Kim Hyesung, Arirang News.
Kim Hyesung reports.
The Bank of Korea on Friday kept its benchmark interest rate unchanged at 1-point-five percent .
This comes after the bank cut rates by a quarter of a percentage point last month citing a slowing economy, in what was its first cut in three years.
Growing uncertainties over the on-going U.S.-China trade dispute and Japan's export restrictions on South Korea have put pressure on the bank to cut rates, but a back-to-back rate cut might signal that the economy is in crisis, prompting the bank to keep rates steady for August.
The last consecutive cuts occurred during the global financial crisis.
Also, the South Korean won has weakened by over 8 percent against the U.S. dollar this year to more than 12-hundred won against the greenback, so cutting rates too soon could knock the won even lower, creating capital flight risks.
But a rate cut is expected in October or November this year as data shows the domestic economy remains sluggish.
Exports, a key driver of South Korea's economic growth, are set for a contraction for the ninth consecutive month on weak global demand.
For the first 20 days in August, exports tumbled 13 percent on-year to less than 25 billion dollars with chip sector shipments plunging 30 percent.
Consumer sentiment is at a 31-month low this month, and headline inflation remained below one percent through July, lower than the bank's two percent target.
Kim Hyesung, Arirang News.