The Bank of Korea’s monetary policy board on Friday decided to keep nation’s benchmark interest rate steady at the record low of 1.75 percent.
That was in line with expectations and unchanged for the second straight month after the BoK had trimmed the rate by 25 basis points from 2.00 percent in March.
That followed quarter-point cuts in October and August – before which the central bank had kept the rate unchanged for 14 straight meetings.
“The committee forecasts that the global economy will sustain its modest recovery going forward, centering around advanced economies such as the US, but judges that the possibility exists of its being affected by changes in the monetary policies of major countries, by the weakening of economic growth in emerging market countries, and by uncertainties over the restructuring of Greek debt,” the bank said.
The threat of deflation continues to persist, with the April inflation rate at a 15-year low of just 0.4 percent as price growth remained below 1.0 percent for the fifth straight month. The April reading marked the lowest since July 1999, which checked in at 0.3 percent.
CPI added 0.1 percent on month in April.
Core inflation, which strips out the volatile costs of food, advanced 2.0 percent on year and 0.1 percent on month. Core CPI had risen 0.2 percent on month and 2.1 percent on year a month earlier.
“Looking ahead the committee forecasts that inflation will continue at a low level, due mainly to the effects of the low oil prices,” the bank said.
Recent economic data also played a role in the bank’s decision to keep rates steady, sporting numbers that were roughly as expected, if not inspiring.
Industrial output in South Korea was down a seasonally adjusted 0.6 percent on month in March, and up 1.8 percent on year.
South Korea had a merchandise trade surplus of $8.49 billion in April, beating forecasts for a surplus of $7.15 billion, and it was up from $8.38 billion in March. Exports were down 8.1 percent on year, while imports tumbled an annual 17.8 percent.
The seasonally adjusted jobless rate came in at 3.7 percent in April, unchanged and as expected.
“Looking ahead, while supporting the recovery of economic growth, the committee 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 such as international oil prices and shifts in major countries’ monetary policies, as well as developments related to the spare capacity in the domestic economy and the trends of household debt and capital flows,” the bank said.
The material has been provided by InstaForex Company – www.instaforex.com