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BOK expected to hold policy rate steady in July: IBs

All News 18:36 July 06, 2017

SEOUL, July 6 (Yonhap) -- South Korea's central bank is expected to keep its key rate frozen in July, foreign investment banks said Thursday.

The Bank of Korea (BOK) is set to hold its rate-review session next Thursday to decide whether to maintain or adjust the all-time low rate of 1.25 percent.

Global investment giant Goldman Sachs and Japanese investment bank Nomura said they expect the BOK to raise the key rate next year, given South Korea's household debt and the monetary policy normalization by the U.S. Federal Reserve, according to the Korea Center for International Finance.

Citibank also said the BOK could raise its key interest rate in the first quarter of 2018, the center said.

The center -- set up in 1999 under the auspices of the South Korean government and the BOK -- is designed to closely monitor movements in international financial markets to prevent another financial crisis that hit hard South Korea in 1997.

Last month, the U.S. Federal Reserve raised key interest rates by 0.25 percentage point, marking up the target range for the federal funds rate to 1-1.25 percent.

The move marked the second time the Fed raised rates this year after the first hike in March. The Fed also said it plans to reduce its securities holdings, a move that could spur rates to rise further.

Still, British bank HSBC said the BOK is unlikely to move in line with the Fed.

Last month, BOK Gov. Lee Ju-yeol said the BOK may take a monetary tightening approach if the economy shows signs of a robust recovery.

In May, the BOK unanimously voted to keep the key rate at 1.25 percent, extending its wait-and-see approach for the 11th consecutive month.


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