[Full Text] Bank of Korea Monetary Policy Committee October Monetary Policy Direction Full Text

Base Interest Rate Held Steady at 0.75% Annually in October
Annual GDP Growth Rate Expected to Be in the 3% Range

[Asia Economy Reporter Jang Sehee] The Monetary Policy Committee of the Bank of Korea decided on the 12th to keep the base interest rate unchanged at the current 0.75%. This decision was made due to the decline in real economic indicators caused by the impact of the fourth wave of COVID-19 and increased uncertainty in global financial markets.

The following is the full text of the monetary policy direction

The Monetary Policy Committee decided to maintain the Bank of Korea's base interest rate at the current level (0.75%) until the next monetary policy direction decision.

The global economy continued its recovery trend despite the spread of variant viruses, supported by expanded vaccination in major countries and easing of restrictions on economic activities. In international financial markets, concerns over persistent global inflation and the increased likelihood of the U.S. Federal Reserve's tapering within the year led to a sharp rise in major countries' government bond yields and a strengthening of the U.S. dollar, while stock prices declined. Going forward, the global economy and international financial markets are expected to be influenced by the extent of COVID-19 resurgence, vaccine distribution status, global inflation trends, and changes in major countries' monetary policies.

The domestic economy continued a favorable recovery. Exports remained strong, facility investment maintained a steady trend, and private consumption, which had slowed due to the COVID-19 resurgence, recently showed signs of recovery. Employment conditions improved with a continued increase in the number of employed persons. Going forward, the domestic economy is expected to sustain its recovery as exports and investment remain robust, and private consumption gradually improves due to vaccination, expanded economic activities, and supplementary budget execution. The GDP growth rate for this year is expected to be around 4%, as projected in August.

The consumer price inflation rate remained at a high mid-2% level due to expanded price increases in petroleum products and services, and the core inflation rate (excluding food and energy) rose to the mid-1% range. The general public's inflation expectations remained at the mid-2% level. Going forward, the consumer price inflation rate is expected to exceed the August forecast path, maintaining a mid-2% level for some time before slightly decreasing, while the core inflation rate is expected to generally rise to the high 1% range.

In financial markets, influenced by movements in international financial markets, long-term market interest rates and the won-dollar exchange rate rose sharply, and stock prices fell significantly. The increase in household loans remained at a high level, and housing prices continued to rise strongly in both the Seoul metropolitan area and other regions.

The Monetary Policy Committee 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. Although uncertainties related to COVID-19 persist, the domestic economy is expected to maintain favorable growth and inflation is expected to remain above 2% for some time. Therefore, the degree of monetary policy easing will be appropriately adjusted going forward. The timing of any additional adjustment in easing will be carefully judged by closely monitoring the development of COVID-19, changes in growth and inflation trends, accumulated risks of financial imbalances, and changes in major countries' monetary policies.

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