SEOUL, April 15 (Xinhua) — South Korea’s central bank on Thursday froze its policy rate at a record low on lingering economic uncertainty from the COVID-19 pandemic despite an improvement in recent economic data.
Bank of Korea (BOK) Governor Lee Ju-yeol and six other monetary policy board members left the benchmark seven-day repurchase rate unchanged at an all-time low of 0.50 percent. The policy rate has been kept on hold since May last year.
It was in line with market expectations. According to a Korea Financial Investment Association (KFIA) survey of 100 fixed-income experts, all respondents predicted the rate freeze.
The BOK said in a statement after the rate-setting meeting that it will maintain its accommodative monetary policy stance as there remains a high uncertainty over the path of COVID-19 though the domestic economy’s recovery is expected to strengthen gradually.
It noted that inflationary pressure on the demand side is forecast to be modest.
Recent economic indicators showed signs of recovery, but the BOK refrained from altering the key rate amid a still high number of COVID-19 cases.
In the latest tally, South Korea reported 698 more cases of COVID-19 for the past 24 hours, raising the total number of infections to 112,117. The daily caseload hovered around 700 for two days, fueling worry about the fourth wave of the pandemic.
The country’s export kept growing in recent months as the launch of vaccination campaigns across the world raised global demand for locally-made products.
The daily average export advanced 16.6 percent in March and 26.4 percent in February each on a yearly basis, after growing in single digits in January and last December.
The BOK said the trend of the global economic recovery has strengthened on the back of the stimulus packages in major economies and the expansion of vaccinations.
Helped by the export recovery, the business sentiment index (BSI) among manufacturers increased from 83 in March to 91 in April, while the reading for non-manufacturers gained from 72 to 78.
Production in the mining and manufacturing industry rose 0.9 percent in February from a month earlier, but it was down from an expansion of 7.8 percent in the previous month.
Output in the services sector grew 0.7 percent in February on a monthly basis, after dropping 1.8 percent in January.
Retail sale, which reflects private consumption, picked up 8.4 percent in February from a month earlier, after making no change in the previous month.
Sentiment among consumers over economic situations increased 3.1 points from a month earlier to 100.5 in March, topping the 100-point mark for the first time since January last year.
The improved consumer sentiment was attributable to the launch of mass vaccinations here for the COVID-19 in February.
However, pressure mounted on the BOK to hike its benchmark rate amid a higher global price for crude oil and the record-breaking household debts.
Debts owed by households to banks amounted to 1,009.5 trillion won (about 900 billion U.S. dollars) as of the end of March, up 6.5 trillion won (5.8 billion U.S. dollars) from a month earlier.
It marked the second-highest March increase as demand remained strong for mortgage loan amid the record-low policy rate.
Dubai crude, South Korea’s benchmark, averaged 64.44 U.S. dollars per barrel last month, up 5.8 percent from the previous month. Enditem