Xinhua
25 May 2023, 12:44 GMT+10
SEOUL, May 25 (Xinhua) -- South Korea's central bank on Thursday froze its policy rate for the third successive time this year on the back of lower inflationary pressure and greater worries about an economic downturn.
Bank of Korea (BOK) Governor Rhee Chang-yong and other monetary policymakers decided to leave the benchmark seven-day repurchase rate unchanged at 3.50 percent.
It was in line with market expectations. According to the Korea Financial Investment Association's poll of 100 fixed-income experts, 89 percent predicted the rate freeze this month.
The BOK put the rate on hold in February and April after delivering seven back-to-back rate hikes by 3.0 percentage points between August 2021 and January 2023.
The successive rate freeze came amid lower inflationary pressure. The country's consumer prices rose 3.7 percent in April from a year earlier, falling below 4 percent in 14 months.
Inflation expectations, which measure the outlook among consumers over headline inflation, slipped 0.2 percentage points over the month to 3.5 percent in May.
The BOK said in a statement that the consumer price inflation was expected to fall considerably owing to the base effect from the sharp rise in global oil prices last year, noting that the headline inflation will fluctuate at around the 3 percent level until the end of this year.
Concerns deepened over an economic slump due to weaker global demand for South Korean products and higher borrowing costs that roiled the real estate market.
The country's export continued to slide for the seventh consecutive month in April, leading to trade deficits for 14 months in a row.
The BOK said the domestic economic growth continued to slow down with the ongoing sluggishness of investment and export, forecasting that the economic growth was expected to remain weak for some time.
Higher borrowing costs would expand the debt-servicing burden for households struggling with massive debts that would negatively affect the already faltering real estate market.
Mortgage loans to households increased in the January-March quarter due to the supply of government-backed mortgage loans, but it could be temporary amid the high borrowing costs and the economic slowdown.
Expectations remained for the BOK to hike rates owing to the still high inflation and a wider gap between the South Korean and the U.S. interest rates.
The consumer price inflation of 3.7 percent in April far exceeded the BOK's mid-term inflation target of 2 percent.
The U.S. Federal Reserve lifted its target range for the federal funds rate by 25 basis points to 5.00 percent-5.25 percent in early May, widening the gap with South Korea's policy rate.
The Fed's rapid rate hikes put the BOK on alert as the belated response may force foreign capital out of the South Korean financial market and cut the value of the domestic currency versus the greenback.
The local currency's depreciation would increase import costs for raw materials, putting inflationary pressure on the South Korean economy.
Get a daily dose of Middle East Star news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Middle East Star.
More InformationLONDON, UK: This week, Adidas' newest running shoes, the Adizero Adios Pro Evo 1, went on sale for US$500. Worn ...
© Provided by Xinhua World Trade Organization data show that in 2022, China was the world's largest exporter of clothing.LONDON, ...
© Provided by Xinhua BEIJING, Sept. 29 (Xinhua) -- In an automotive workshop spanning an area equivalent to 16 soccer ...
New Delhi [India], September 29 (ANI): The Rs 2,000 denomination banknote will cease to have its value after Saturday and ...
Washington, DC [US], September 29 (ANI): Reiterating the need for reforms in the United Nations, External Affairs Minister S Jaishankar ...
Antagonism between the two expected candidates for US president in 2024 is ramping up as the political battleground turns increasingly ...
MANILA, The Philippines: The Philippines remains steadfast in its resolve not to yield to Chinese efforts to obstruct its fishermen ...
VICTORIA, Texas: This week, U.S. District Judge Drew Tipton in Victoria, Texas, ruled that President Joe Biden did not have ...
WASHINGTON D.C.: The National Transportation Safety Board (NTSB) said it is investigating a JetBlue flight on Monday that experienced sudden ...
SEOUL, South Korea: Marking a tougher stand against North Korea, South Korea held its first large-scale military parade in over ...
WASHINGTON D.C. After hundreds of deaths overseas from contaminated cough syrups, the U.S. Food and Drug Administration (FDA) has cracked ...
EL PASO, Texas: Over the weekend, Oscar Leeser, Mayor of El Paso, said that the surge in migrants crossing the ...