South Korea's central bank held its key interest rate steady for the sixth straight time Thursday amid a slowdown in growth and heightened uncertainties, such as the prolonged Ukraine-Russia war and rising household debts.
In a widely expected decision, the monetary policy board of the Bank of Korea (BOK) kept the benchmark seven-day repo rate unchanged at 3.5 percent, according to South Korea's News Agency (Yonhap).
This marked the sixth straight time that the BOK has stood pat following rate freezes in February, April, May, July and August. The rate freezes came after the BOK delivered seven consecutive rate hikes from April 2022 to January 2023.
Asia's fourth-largest economy is facing the prospect of slowing down in the face of growing economic risks in China, the country's largest trading partner, and an extended slump in outbound shipments amid easing inflationary pressure.
In May, the bank cut its growth projection for Asia's fourth-largest economy to 1.4 percent from the 1.6 percent predicted three months earlier. South Korea's economy grew at a slightly faster pace of 0.6 percent in the second quarter of this year than three months earlier despite a slump in exports. In the first quarter, the economy expanded 0.3 percent following a 0.3 percent contraction.
The central bank's rate freeze also came in the face of the rate difference with the United States widening. Higher rates in the US are feared to prompt money outflows from South Korea, thereby weakening the local currency against the dollar and exerting upward inflation pressure by making imports more expensive.
In September, the US Federal Reserve froze its benchmark lending rate at a range of 5.25 percent to 5.5 percent, the highest level since 2001, putting the gap between the key rates of South Korea and the United States at an all-time high of 1.75-2.0 percentage points.
Source: Qatar News Agency