Bank of Korea Decides to Keep Base Interest Rate at 0.50%...Monitoring Economic Recovery (Update)

Bank of Korea to Hold Monetary Policy Committee Meeting on 25th
Considering COVID-19 Resurgence and Delayed Real Economy Recovery... Maintaining Accommodative Monetary Policy

[Image source=Yonhap News]

[Asia Economy Reporters Eunbyeol Kim, Sehee Jang] The Financial Monetary Policy Committee of the Bank of Korea has decided to keep the base interest rate at the current annual rate of 0.50%. This marks the ninth consecutive month of holding the rate steady since it was lowered by 0.5 percentage points in May last year.

On the 25th, the Bank of Korea held a Monetary Policy Committee meeting at its headquarters in Seoul and announced that the base interest rate would be maintained at 0.50% per annum. This decision to hold the rate is interpreted as a commitment to maintain an accommodative monetary stance in light of the resurgence of COVID-19 and delays in the recovery of the real economy.

As the recovery of the real economy slows due to the resurgence of COVID-19, the real estate and stock markets have rapidly overheated, making it difficult to adjust the interest rate level either upward or downward at this time.

Earlier, in response to the economic crisis caused by the spread of COVID-19, the Bank of Korea lowered the base interest rate from 1.25% at the beginning of last year by 0.50 percentage points in March and by 0.25 percentage points in May, bringing it down to a historic low of 0.50% per annum.

In a recent survey conducted by the Korea Financial Investment Association targeting 100 bond market experts, 99% of respondents predicted that the base interest rate would remain unchanged in February.

They noted that while long-term government bond yields have shown a gradual upward trend due to increased government bond issuance and expectations of economic recovery, the Bank of Korea is expected to maintain its current accommodative monetary policy due to uncertainties in the real economy such as slowing consumption and employment.

According to the 'January Employment Trends' report released by Statistics Korea on the 10th, the number of employed persons last month was 25,818,000, a decrease of 982,000 compared to one year earlier. This is the largest decline since December 1998 (-1,283,000) during the foreign exchange crisis.

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