The Bank of Korea’s monetary policy board on Thursday decided to maintain the nation’s benchmark interest rate at the record low 1.50 percent for the sixth straight month – in line with expectations.
The central bank could have trimmed the benchmark further as a means of additional stimulus in response to falling exports – but a rebound in GDP convinced the board members to hold steady.
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.
“The trend of economic recovery in the U.S. has been sustained, and that the modest improvements in the euro area have continued. Economic growth in emerging market countries including China has meanwhile continued to slow. The Board forecasts that the global economy will maintain its recovery going forward, albeit at a moderate pace,” the bank said.
Manageable inflation added to the argument to keep rates unchanged. Consumer prices were up 1.0 percent on year in November as price growth moved above 1.0 percent for the first time in 10 months.
That was up from 0.9 percent in October. On a monthly basis, inflation dipped 0.1 percent following the flat reading in the previous month.
Core inflation, which excludes the volatile costs of food, added 0.1 percent on month and 2.4 percent on year in November after adding 0.2 percent on month and 2.3 percent on year in October.
“The board forecasts that inflation will continue at a low level, due mainly to the effects of the low oil prices,” the bank said.
The rest of the economic data was somewhat conflicted.
South Korea’s gross domestic product was revised up to a seasonally adjusted 1.3 percent on quarter in the third quarter of 2015. That’s up from the October preliminary reading that suggested an increase of 1.2 percent on quarter. GDP had added 0.3 percent in Q2.
On a yearly basis, GDP was revised up to 2.7 percent from 2.6 percent in the preliminary reading. GDP had gained 2.2 percent on year in the second quarter.
But exports continued to tumble, sliding 4.7 percent on year in November year to $44.43 billion after shedding 15.8 percent in the previous month.
Imports tumbled an annual 17.6 percent to $34.07 billion after losing 16.6 percent in October for a trade surplus of $10.36 billion.
“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 such as any changes in the U.S. Federal Reserve’s monetary policy or in economic conditions in emerging market countries including China, the movements of capital flows, and the trend of increase in household debt,” the bank said.
Published: 2015-12-10 01:00:00 UTC+00
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