The Bank of Korea held the interest rate steady on Thursday, as inflation slowed and economic growth decelerated, marking the fifth consecutive time without a rate adjustment, shifting the policy focus towards fine-tuning the monetary policy formulation.
The Bank of Korea (BOK) announced on Thursday that the Monetary Policy Committee unanimously decided to keep the base interest rate at 3.50%, consistent with the stance in the first four meetings of the year.
This aligns with the prediction of 43 economists surveyed by Reuters, and the domestic market showed almost no significant fluctuations.
In the interest rate decision statement, the BOK stated that it would maintain this year's economic growth forecast at 1.4%, consistent with the prediction in May, but it would lower next year's growth forecast from 2.3% to 2.2%. It also predicted that inflation would remain unchanged.
Since the last rate hike in January 2023, the BOK has maintained a stable monetary policy. Most economists believe that the central bank has ended its tightening policy from August 2021 to January 2023, during which a 300-basis-point interest rate increase was implemented.
Annual consumer inflation in South Korea has slowed since reaching a 24-year high of 6.3% in July 2022, with July this year at 2.3%, slightly higher than the central bank's 2% midterm target, and it is expected to rebound to around 3% in the coming months.
The policy decision comes amid investors' concerns over the slowdown of Asia's fourth-largest economy, which is heavily reliant on trade, and where consumer confidence showed a decline for the first time in six months in August.
Affected by the economic downturn in China and weakened global demand, as well as the delayed recovery in the semiconductor industry, both factors have slowed the partial benefits brought by the relaxation of pricing policies.
Moreover, policymakers are also concerned about the rise in household debt, primarily due to the impact of increased mortgage loan demand, which saw its fastest growth in a year and a half in the second quarter.
