Bank of Korea keeps interest rate on hold in January

The South Korean central bank kept its key interest rate on hold during its meeting today. The policy rate was kept unchanged at 1.5 percent, as was expected. Given that the economy is on a strong footing, there is likelihood that the rates would be raised again in the months ahead. But there are still several uncertainties along the road, noted Commerzbank in a research report.

Firstly, the South Korean won has appreciated over 12 percent since the start of 2017, which has slightly tightened the monetary conditions. As an export-oriented economy, too strong currency is definitely not a piece of good news. Secondly, while the growth scenario looks decent, the inflation outlook continues to be subdued. Recent data even showed a downside of the current BoK’s inflation forecast.

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