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THE Bank of Korea extended a pause on interest rate for the 12th straight meeting on Thursday, as it continues efforts to tame inflation amid expectations policymakers will soon agree to lower the highest borrowing costs in 15 years.
The benchmark interest rate was held at 3.50 per cent at its policy review, as widely expected by all 40 economists surveyed by Reuters.
Expectations the BOK could cut interest rates in the coming months gained momentum after headline consumer price readings for June released last week showed inflation slowed to an 11-month low of 2.4 per cent, close to its target of 2 per cent.
South Korea’s economy is confronting sticky inflation and policymakers are waiting for sufficient evidence that prices are cooling to begin lowering borrowing costs from restrictive levels.
The focus is on Governor Rhee Chang Yong’s press conference at 0210 GMT, where the names of any dissenters could be announced. Dissenting votes typically lead to policy changes in subsequent months.
Governor Rhee said on Tuesday the central bank will now consider trade-offs between inflation and financial stability, given that price rises are easing amid a weaker won and rising household debt.
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Economists say a wobbly won, down about 7 per cent this year against the dollar, can potentially push back the timetable for interest rate relief, even as political pressure for early rate cuts grows.
“Sluggish economic growth and lower inflation support a near-term rate cut, although policymakers are likely to have concerns about FX and housing market,” Oh Suk Tae, an economist at Societe Generale said.
“The rise in USD/KRW towards 1,400 and the rebound in Seoul apartment prices should support a wait-and-see stance in monetary policy.” REUTERS
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