According to Yonhap News,

(SEOUL=Yonhap News) South Korea's central bank on Thursday held its benchmark policy rate unchanged at a record low of 0.5 percent as the country is grappling with the recent spike in COVID-19 infections, which put the greater Seoul area under the highest level of virus restrictions.

As widely expected, the monetary policy board of the Bank of Korea (BOK) voted to leave the base rate steady in this year's fifth rate-setting meeting.

The BOK's decision came as the nation was battling against its worst-ever COVID-19 outbreaks with daily new infections rising above 1,000 for more than a week.

BOK Gov. Lee Ju-yeol, who has hinted that monetary policy may begin to normalize "within this year," told reporters that the pace of an economic recovery is unlikely to be significantly undermined by the fourth wave of the pandemic because of vaccination efforts and an extra budget.

Lee said Thursday's rate freeze decision was not unanimous and a board member cast a dissenting vote insisting that the BOK must raise its key rate by 0.25 percentage point.

Lee also voiced a hawkish tone, saying that the "normalization of interest rates" is needed to cope with financial imbalances.

Despite the fourth wave, the Korean economy is expected to expand in line with the projection in May, Lee said.

This year's economic growth is projected to be around 4 percent, consistent with the forecast in May, he said.

"The Korean economy has continued its sound recovery. Exports and facilities investment have sustained their buoyancy and private consumption has shown improvement," the BOK said in a statement.

"Going forward, exports and investment will sustain their buoyancy, while private consumption is forecast to temporarily weaken affected by the coronavirus resurgence but then return to the path of recovery supported by the execution of a supplementary budget. GDP growth this year is projected to be around 4 percent, consistent with the forecast in May," it said.

Investors will closely watch Lee's press conference, which will provide details on whether there were any dissenters.

To bolster the pandemic-hit economy, the BOK slashed the key rate to the all-time low of 0.5 percent in May last year by delivering an emergency rate cut of half a percentage point.

Despite signs of a robust recovery in exports, weaker consumption has weighed on employment and increased pressure on policymakers.

So far this year, South Korea's economic recovery has shown signs of a recovery, helped by a strong rebound in exports.

Exports, which account for about half of the nation's gross domestic production, jumped 39.7 percent in June from a year earlier, extending their gains for an eighth consecutive month, as demand for chips and automobiles stayed strong amid the improving global economy.

Outbound shipments came to US$54.8 billion last month, according to government data.

In the first 10 days of July, exports rose 14.1 percent on-year, customs data showed.

kdh@yna.co.kr


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Source: Yonhap News (July 15, 2021)