The Bank of Korea’s monetary policy board on Thursday kept the nation’s benchmark interest rate unchanged at the record low 1.50 percent for the eighth straight month – in line with expectations.
The central bank had trimmed rates by 25 basis points in both its June and March meetings. That followed quarter-point cuts in October and August – before which the central bank had kept the rate unchanged for 14 straight meetings.
“Looking at the Korean economy, the trend of decline in exports and the weakening recovery of domestic demand activities such as consumption are continuing, while the sentiments of economic agents have been sluggish,” the bank said.
The South Korean economy continues to be stuck in neutral, but any thought of providing additional stimulus was negated by a sharp jump in consumer prices as inflation jumped to 1.3 percent in February from 0.8 percent in January.
On a monthly basis, inflation added 0.5 percent following the flat reading in the previous month.
Core inflation, which excludes the volatile costs of food, added 0.3 percent on month and 1.8 percent on year. That’s up from 0.2 percent on month and 1.7 percent on year in the previous month.
“The board forecasts that consumer price inflation will continue at a low level, due mainly to the low oil prices. In the housing market, sales and leasehold deposit prices showed low rates of increase in both Seoul and its surrounding areas and the rest of the country,” the bank said.
The rest of the economic data was uninspired.
Industrial production in South Korea was down 1.8 percent on month in January, missing forecasts for a contraction of 1.0 percent following the 1.3 percent increase in December.
On a yearly basis, output was down 1.9 percent versus forecasts for a fall of 1.5 percent following the revised 1.5 percent contraction in the previous month.
“The board will conduct monetary policy so as to maintain price stability over a medium-term horizon, and pay attention to financial stability. In this process it will closely monitor external risk factors,” the bank said.
The material has been provided by InstaForex Company – www.instaforex.com