Bank of Korea Maintains This Year's Growth Rate at 3.0%... Interest Rate Also Frozen Amid Uncertainty (Comprehensive)

Maintaining 2.5% Growth Rate Next Year... Economic Uncertainty Continues
Base Interest Rate to Remain Unchanged for 9 Months

On the morning of the 25th, Lee Ju-yeol, Governor of the Bank of Korea, presided over the Financial Monetary Policy Committee's plenary meeting held at the Bank of Korea in Jung-gu, Seoul, and struck the gavel.

[Asia Economy Reporters Eunbyeol Kim, Sehee Jang] The Bank of Korea's Monetary Policy Committee has decided to keep the base interest rate at the current annual rate of 0.50%.

Additionally, it decided to maintain the real Gross Domestic Product (GDP) growth rates for this year and next year at 3.0% and 2.5%, respectively.

On the 25th, the Bank of Korea held a Monetary Policy Committee meeting at its headquarters in Seoul and announced that it would maintain the base interest rate at 0.50% per annum. This marks the ninth consecutive month of holding the rate steady since it was lowered to 0.5% in May last year.

This decision to keep the base rate unchanged is interpreted as a commitment to maintain an accommodative monetary stance, considering the resurgence of COVID-19 and delays in the recovery of the real economy.

While the real economy's recovery is slowing due to the resurgence of COVID-19, the real estate and stock markets are rapidly overheating, making it difficult to adjust the interest rate level either upward or downward at this time.

Previously, 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% last year by 0.50 percentage points in March and 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 had already predicted that the base interest rate would be held steady in February.

They noted that although long-term government bond yields are showing 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 a year earlier. This is the largest decline since December 1998 (-1,283,000) during the Asian financial crisis.

Regarding this, Professor Hajun Kyung of Hanyang University's Department of Economics said, "It is difficult to say that the economy has entered a definite upward trend," adding, "Due to the rapid increase in household debt and unstable movements in the asset market, it would have been impossible to lower interest rates further."

Professor Donghyun Ahn of Seoul National University's Department of Economics also stated, "Our current interest rate appears to be at the lower bound," and added, "Now, the only options are to either hold the rate steady or raise it."

Meanwhile, the Bank of Korea forecasted South Korea's real GDP growth rates for this year and next year at 3.0% and 2.5%, respectively. In November last year, it had raised these projections by 0.2 percentage points from the August forecast, but this time it decided to maintain them as they are.

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