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

Finance 10:51 November 29, 2019

(ATTN: RECASTS headline; UPDATES with reports of BOK statement on its latest monetary policy decision, minor changes in paras 3-5, 13-14; ADDS photo)
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 the year, stressing the need to first see the effect of its two previous rate reductions this year.

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.

"Looking ahead, the board will conduct monetary policy so as to ensure that the recovery of economic growth continues and consumer price inflation can be stabilized at the target level over a medium-term horizon, while paying attention to financial stability," the board said in a released statement.

"In this process it will judge whether to adjust the degree of monetary policy accommodation, while carefully monitoring developments in the U.S-China trade negotiations," it added.

The decision to keep the base rate frozen was 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.

Bank of Korea Gov. Lee Ju-yeol (L) attends the BOK monetary policy board's latest and final rate-setting meeting of the year in Seoul on Nov. 29, 2019, in which the seven-member board voted to keep the base rate frozen at 1.25 percent in November and the remainder of the year. (Yonhap)

Still, the decision comes despite a widely anticipated cut in the central bank's latest growth outlook for Asia's fourth-largest economy, which is due later in the day.

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."

The BOK board noted the local economy was expected to grow "at around 2 percent in 2019."

A BOK official explained this referred to a range of between 1.9 percent and 2.1 percent.


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