[Full Text] BOK Monetary Policy Committee February Direction... "Domestic Economic Growth Expected to Be Moderate"

Uncertainty in COVID-19 Growth Path Increases

Domestic Economic Growth Expected to Be Moderate

'Monetary Policy Easing Stance' Maintained

[Asia Economy Reporter Jang Sehee] The Monetary Policy Board of the Bank of Korea held a monetary policy meeting on the 27th and decided to keep the base interest rate unchanged at the current level of 1.25% per annum.

The Monetary Policy Board assessed that the uncertainty of the future growth path remains high due to the impact of the novel coronavirus disease (COVID-19). However, considering the continued recovery in growth and the need to pay attention to financial stability, it decided to maintain the base interest rate.

The following is the full text of the monetary policy direction

The Monetary Policy Board decided to operate monetary policy by maintaining the Bank of Korea’s base interest rate at the current level (1.25%) until the next monetary policy direction decision.

The global economy continued to experience a slowdown in growth due to sluggish trade. In international financial markets, the spread of COVID-19 caused volatility in price variables, with major countries’ government bond yields and stock prices falling and the US dollar strengthening. Going forward, the global economy and international financial markets are expected to be influenced by the extent of COVID-19 spread, developments in protectionism, and geopolitical risks.

The domestic economy is judged to have weakened growth momentum. Although the slump in facility investment has eased, construction investment adjustment continued, and consumption contracted and exports slowed due to the spread of COVID-19. The employment situation showed continued improvement, with an increase in the number of employed persons. The GDP growth rate for this year is expected to fall below the November forecast (2.3%) at the low 2% level, and uncertainty about the future growth path remains high due to the impact of COVID-19 and other factors.

The consumer price inflation rate rose to the mid-1% range due to a turnaround in prices of agricultural, livestock, and fishery products and an expansion in petroleum product prices. The core inflation rate (excluding food and energy) rose to the high 0% range, and general public inflation expectations remained in the high 1% range. Going forward, the consumer price inflation rate is expected to be in the low 1% range before slightly declining to around 1% for the year, and the core inflation rate is expected to remain in the high 0% range.

In financial markets, volatility in price variables expanded due to the spread of COVID-19. Long-term market interest rates and stock prices fell sharply, and the won/dollar exchange rate rose significantly. Household loans increased slightly, and housing prices showed a relatively high rise centered on the metropolitan area outside Seoul.

The Monetary Policy Board will continue to operate monetary policy with attention to financial stability while ensuring that the recovery in growth continues and that inflation stabilizes at the target level over the medium term. As the domestic economy’s growth is expected to be moderate and inflationary pressures from the demand side remain low, the accommodative stance of monetary policy will be maintained. In this process, the Board will closely monitor the extent of COVID-19 spread, its impact on the domestic economy, changes in financial stability such as the increase in household debt, and will decide whether to adjust the degree of accommodation. In addition, developments in global trade disputes, major countries’ economic conditions, and geopolitical risks will be carefully observed.

This content was produced with the assistance of AI translation services.