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The Bank of Korea, on Thursday, kept its base rate on hold at a record low of 1.25 percent, as widely expected by the markets. The monetary policy board projects that the global economy will continue with its weak recovery in the future, but it will be impacted by factors such as uncertainties surrounding Brexit, alterations in the monetary policies of major nations and economic and financial conditions in emerging nations.
The Bank of Korea lowered its economic growth and inflation outlook amidst uncertainty. The central bank mentioned in its statement that even if the sentiments of economic agents have been sluggish, the trend of falling exports has continued but domestic demand activities such as consumption seems to be rebounding. On the labor market front, the central bank stated that the number of persons employed has increased and the jobless rate has declined in June as compared to June of last year.
According to the board, the domestic economy will continue with its modest growth trend in the future mainly due to expansionary macroeconomic policies. However, given the economic conditions at home and abroad, the uncertainties surrounding the growth path appears to be high. The Bank of Korea now projects the real GDP to grow 2.7 percent this year and 2.9 percent in 2017.
On the inflation front, the central bank’s board projects the consumer price to remain at a low level for some time and slowly accelerate as the impacts of low oil prices wane. The BoK expects headline consumer prices to rise 1.1 percent this year, with 0.9 percent in the first half and 1.3 percent in the second half. But the consumer price inflation is likely to accelerate 1.9 percent next year due to waning downward pressures from lower oil prices and the gradual economic recovery.
The central bank statement mentioned that the board will carry out monetary policy in order to guarantee that the economic growth recovery continues and inflation reaches the target level in the medium-term horizon. It mentioned that it will closely observe financial stability. The board will also maintain a close watch on the trend of rising housing debt, the impact of Brexit, progress of corporate restructuring and any alterations in the monetary policies of major economies.
