Bank of Korea keeps key rate at record low

Bank of Korea Governor Lee Ju-yeol / Yonhap

The South Korean central bank on Thursday held its policy rate unchanged at a record low of 0.5 percent, while slightly revising up this year's economic outlook, amid growing concerns over a winter wave of coronavirus infections.

As expected, the monetary policy board of the Bank of Korea (BOK) voted to leave the base rate steady in this year's final rate-setting meeting.

Apparently driven by signs of a modest recovery in exports, the BOK revised up this year's economic growth outlook to 1.1 percent contraction, compared with a previous forecast of a 1.3 percent retreat.

The BOK expected Asia's fourth-largest economy to grow 3 percent next year, faster than a previous forecast of 2.8 percent expansion for 2021.

The BOK predicted that consumer prices may grow 0.5 percent this year, slightly up from its previous forecast of 0.4 percent gain.

In late August, the BOK froze the key rate as economic uncertainty heightened amid a flare-up in new coronavirus cases. In July, the bank left the rate unchanged as well.

To bolster the pandemic-hit economy, the BOK slashed the key rate to the all-time low of 0.5 percent in May after delivering an emergency rate cut of half a percentage point in March.

Analysts said economic uncertainty has increased as daily new virus cases have recently stayed above 300, although the nation has largely brought the outbreak under control.

On Thursday, South Korea reported 583 new coronavirus cases, the highest since early March, when the nation grappled with the first wave of virus infections.

The central bank said private consumption is expected to recover at a slower-than-expected pace this year due to the virus fallout.

South Korea's economy contracted 3.2 percent in the second quarter from three months earlier after shrinking 1.3 percent on-quarter in the January-March period.

But the nation's economy returned to modest growth in the third quarter, marking the first quarterly expansion since the coronavirus pandemic began, as exports showed signs of improvement.

In the July-September period, the economy grew 1.9 percent from the previous quarter.

South Korea's low inflationary pressure and rising housing prices also appeared to prompt the BOK board to stand pat, analysts said. (Yonhap)