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BOK keeps key rate at record low amid pandemic

Economy 09:39 November 26, 2020

By Kim Deok-hyun

SEOUL, Nov. 26 (Yonhap) -- The South Korean central bank on Thursday held its policy rate unchanged at a record low of 0.5 percent, amid growing concerns over a winter wave of coronavirus infections.

As expected, the monetary policy board of the Bank of Korea (BOK) voted to leave the base rate steady in this year's final rate-setting meeting.

In late August, the BOK froze the key rate as economic uncertainty heightened amid a flare-up in new coronavirus cases. In July, the bank left the rate unchanged as well.

To bolster the pandemic-hit economy, the BOK slashed the key rate to the all-time low of 0.5 percent in May after delivering an emergency rate cut of half a percentage point in March.

Analysts said economic uncertainty has increased as daily new virus cases have recently stayed above 300, although the nation has largely brought the outbreak under control.

Financial markets will focus on the BOK's economic outlook revision later in the day.

In August, the BOK revised down its 2020 growth outlook to a sharper-than-expected contraction of 1.3 percent, citing the impact of a resurgence in virus cases.

This file photo, taken June 4, 2020, shows stacks of import-export cargo containers at South Korea's largest seaport, located in Busan, 450 kilometers southeast of Seoul. (Yonhap)

In the worst scenario, in which the flare-up in COVID-19 cases continues into the winter, the BOK forecast the South Korean economy to retreat 2.2 percent this year.

The central bank said private consumption is expected to recover at a slower-than-expected pace this year due to the virus fallout.

South Korea's economy contracted 3.2 percent in the second quarter from three months earlier after shrinking 1.3 percent on-quarter in the January-March period.

But the nation's economy returned to modest growth in the third quarter, marking the first quarterly expansion since the coronavirus pandemic began, as exports showed signs of improvement.

In the July-September period, the economy grew 1.9 percent from the previous quarter.

South Korea's low inflationary pressure and rising housing prices also appeared to prompt the BOK board to stand pat, analysts said.


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