FILE PHOTO: The logo of the Bank of Korea is seen in Seoul, South Korea, November 30, 2017. REUTERS/Kim Hong-Ji/File Photo
November 29, 2019
By Choonsik Yoo and Joori Roh
SEOUL (Reuters) – South Korea’s central bank left its policy rate steady, as expected, at its last meeting of the year on Friday, taking time out to assess the effects of its recent easings on an economy hit hard by the Sino-U.S. trade war and cooling global demand.
The Bank of Korea’s policy board voted to hold the benchmark interest rate <KROCRT=ECI> at 1.25%, a media department official said, in line with forecasts by all the 19 economists polled by Reuters.
Governor Lee Ju-yeol is due to hold a news conference at 0220 GMT, when he is expected to disclose how the policy panel voted and give the central bank’s revised 2019-2020 economic growth and inflation forecasts.
Local stocks, currency and bond futures all showed a muted reaction as investors waited for clues from the governor’s news conference on the future policy direction.
“Whether today’s decision was a unanimous call will be the key information for the investors as it will help the markets assess future policy direction,” said Paik Yoon-min, fixed-income analyst at Kyobo Securities.
While predicting the rate would be left unchanged at Friday’s meeting, 11 out of the 14 economists surveyed by Reuters saw the Bank of Korea cutting the rate next year to 1.0% or lower, which would be the lowest since it adopted the current policy system in 1999.
Paik said the market’s expectation for a further rate cut would remain high until clear evidence emerges to show the economy is firmly on a rebound.
Heavily dependent on exports of computer chips, smartphones, cars and ships, Asia’s fourth-largest economy is headed for the worst growth in a decade even after two rate cuts and a big increase in government budget spending.
The central bank cut the policy rate in July and October by 25 basis points each time, but the bank had been given little chance of making another cut so soon as two of the seven policy board members had voted to keep it unchanged in October.
Economists have also said the Bank of Korea would become more cautious as the policy rate currently matched the lowest ever level, set in late 2017.
Despite some signs of manufacturing activity beginning to stabilize and optimism that the U.S.-China trade war would soon end, analysts said South Korea’s economy would still require further policy support to make a solid recovery.
(Editing by Shri Navaratnam)
