Bank of Korea Stands Pat for Second Straight Time, as Expected
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SEOUL (Reuters - South Korea's central banks held interest rates steady on Tuesday for a second consecutive meeting. This was in spite of conflicting risks from high inflation, a slowing economy, and heightened financial uncertainty.
According to the Bank of Korea, its seven members of the monetary policy board voted for the same base rate at 3.50% as on February 23rd.
As investors waited for Governor Rhee Changyong's news conference at 0210 GMT, local markets displayed a muted response.
This decision was consistent with the predictions of 39 out 40 economists surveyed at Reuters. One respondent forecasted a 25-basis point hike.
This is the first time that the Bank of Korea has maintained the policy rate at consecutive meetings since August 2021, when it began tightening its policies.
South Korea's annual consumer inflation is now at 4.2%. This is more than twice the target of 2%, but it has fallen from 6.3% in July 2022 which was a 24 year high.
After the February board meeting, Governor Rhee stated that his bank would not have to increase rates if inflation continues to moderate. However, he refused to declare the tightening period over.
South Korea's highly trade-dependent economy is losing momentum. This has been due to a slowing global economy and still sluggish Chinese demand. Also, cooling consumer spending after aggressive interest rate hikes has slowed down domestic consumption.