BOK stands pat at record low after emergency rate cut to battle coronavirus

By Byun Duk-kun

SEOUL, April 9 (Yonhap) -- The Bank of Korea (BOK) on Thursday kept its base rate frozen as widely expected following its surprise rate reduction last month that sought to minimize the fallout from the new coronavirus outbreak.

The BOK decision to keep the rate steady came less than four weeks after the South Korean central bank delivered an emergency rate cut on March 16, slashing the policy rate by a whopping half a percentage point to a new record low of 0.75 percent.

The BOK's first emergency rate cut in more than a decade came five days after the World Health Organization declared the spread of COVID-19 a pandemic.

Since its first case of the novel coronavirus here, the respiratory disease had infected some 10,300 people in the country as of Wednesday, with its death toll from COVID-19 topping 200.

The BOK has cut its growth estimate for Asia's fourth-largest economy to 2.1 percent from the previous 2.3 percent and is widely expected to further slash its outlook.

Experts here expect the central bank to keep its policy rate steady for some time.

"With its active steps taken in advance against an economic slowdown and liquidity crunch caused by COVID-19 in the forms of an emergency rate cut and Korean-style quantitative easing, the BOK is expected to monitor the effect of the preceding measures," Daishin Securities analyst Kong Dong-rak said earlier.

Kong was one of 15 analysts who expected to see a rate freeze this week in a poll conducted by Yonhap Infomax, in which only three others anticipated a rate cut.

Also, only seven out of the 18 experts surveyed anticipated an additional rate reduction before the year's end.

Steps taken by the BOK against the coronavirus outbreak so far include the "unlimited" purchase of local bonds in repo operations to boost market liquidity.

It has also delivered more than US$14 billion in U.S. dollars to local banks under its bilateral currency swap arrangement with the U.S. Fed that is designed to help stabilize the local foreign exchange market.

The Korea-U.S. currency swap deal is worth $60 billion. South Korea has currency swap arrangements with at least eight other countries, worth more than $190 billion in total.

bdk@yna.co.kr
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