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BOK keeps base rate steady, waiting for previous rate cuts to kick in

Finance 09:52 November 29, 2019

By Byun Duk-kun

SEOUL, Nov. 29 (Yonhap) -- The Bank of Korea (BOK) on Friday left the base interest rate unchanged at a record low, at least for the remainder of this year, despite a widely anticipated cut in its growth outlook for Asia's fourth-largest economy, apparently waiting to see the outcome of its two rate reductions in recent months.

The central bank's rate-setting body's decision to keep the rate steady came about one month after the seven-member board voted to slash the policy rate to a record-low 1.25 percent in its second rate reduction in just three months.

It is in line with market consensus.

In a recent survey conducted by Yonhap Infomax, the financial news arm of Yonhap News Agency, all 18 experts polled anticipated a rate freeze in the central bank's eighth and final rate-setting meeting of the year.

However, the decision comes amid growing speculation that a downward revision in the BOK's growth outlook for South Korea this year is inevitable, which generally warrants measures to support the economy, such as monetary policy actions.

A series of data points to the sobering reality that the economy is losing growth momentum in the face of prolonged trade row between the United States and China, the country's two largest trading partners.

South Korea's exports had dropped for 11 consecutive months as of October amid the prolonged Sino-American trade tussle.

Also faced with sluggish demand at home, partly seen in the record-low inflation growth of negative 0.4 percent in September, the South Korean economy is widely projected to grow at around 2 percent or even less, falling short of the 2.2 percent growth estimate by the central bank.

The BOK has already three times revised down its growth outlook from the 2.7 percent late last year to 2.6 percent in January, 2.5 percent April and then to 2.2 percent in July.

The central bank is set to offer its final growth outlook for the year later in the day, but BOK Gov. Lee Ju-yeol has already noted it "may not be easy to meet the 2.2 percent growth projection."


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