The Bank of Korea Holds Base Rate at 0.50% per Year... 'Continued Watch on Economic Recovery Trend' (Update)

The Bank of Korea's 'April Monetary Policy Committee'... Base Rate Held Steady for 11 Months
Monitoring COVID-19 Developments, Focus on Economic Defense

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The Bank of Korea's Monetary Policy Committee decided on the 15th to keep the base interest rate unchanged at the current annual rate of 0.50%. This marks the 11th consecutive month of holding the rate steady since it was lowered by 0.25 percentage points in May last year.

On the 15th, 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. Although the domestic economy is showing signs of recovery centered on exports and investment, it appears that the decision took into account the need to monitor the future developments of COVID-19.

In particular, recent signs of a resurgence of COVID-19 across various regions nationwide have raised concerns about additional damage to the real economy. Furthermore, with the announcement of some loan regulation easing measures for non-homeowners and young people expected soon, there is also an interpretation that the released liquidity could drive up housing prices.

Bank of Korea Governor Lee Ju-yeol has repeatedly stated that the current accommodative monetary policy will continue. At a press conference immediately after the Monetary Policy Committee meeting on February 25, Governor Lee said, "Because the uncertainty of the economic flow is very high, at this point, it is not a situation to mention raising the base interest rate or fully normalizing the policy." This is interpreted as meaning that the accommodative stance will be maintained until the COVID-19 recovery becomes more visible.

Meanwhile, if ultra-low interest rates continue, funds borrowed and channeled into asset markets are expected to increase, further driving up real estate and stock prices. According to the Bank of Korea's recent report 'Financial Market Trends in March 2021,' as of the end of March, the outstanding household loans in the banking sector amounted to 1,009.5 trillion won, an increase of 6.5 trillion won compared to the previous month. In particular, mortgage loans increased by 5.7 trillion won, accelerating the overall growth rate of household loans.

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