South Korea holds rate, easy stance, still ready to adjust

    South Korea’s central bank left its base rate steady at 1.25 percent and said it would maintain its accommodative monetary policy stance as domestic economic growth is expected to be moderate and inflation low, confirming it is still willing to “judge whether to adjust the degree of monetary policy accommodation.”
     The Bank of Korea (BOK), which has cut its rate twice this year by a total of 50 basis points in October and July, said the pace of domestic economic growth has remained slow but next year the  sluggishness in exports and facilities investment is expected to ease and consumption growth to rise moderately although the adjustment in construction investment will continue.
     BOK lowered its forecast for 2019 growth to around 2.0 percent from July’s forecast of 2.2 percent  and forecast 2.3 percent growth in 2020, down from 2.5 percent previously forecast. In 2018 the economy grew 2.7 percent.
    “As it is expected that domestic economic growth will be moderate and it is forecast that inflationary pressures on the demand side will remain at a low level, the Board will maintain its accommodative monetary policy stance,” BOK said.
    Whether to adjust the degree of accommodation, BOK said this would be decided in light of developments in U.S.-China trade talks, the economic and monetary policies of major countries, the rise in household debt, along with geopolitical risks and their impact on the domestic economy and financial stability.
     South Korea’s economy, considered a bellwether for the global economy and trade due to its reliance on exports, grew 2.0 percent annually in the third and second quarters of this year.
     Last month BOK Governor Lee Ju-yeol said higher tariffs and uncertainties from the U.S.-China trade war had probably cut South Korea’s growth by 0.4 percentage points in 2019.
     Consumer price inflation rose slightly in October to zero percent from a decline of 0.4 percent in September and BOK forecast headline inflation would rise moderately to around 1.0 percent in 2020 while core inflation, which excludes food and energy, would be in the upper zero percent level.

     The Bank of Korea issued the following statement: