Rates seen as unchanged this month but cut later

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Rates seen as unchanged this month but cut later

The Bank of Korea may again stand pat on its policy rate this month but will likely slash it in the first half of the year to support the local economy as it faces growing headwinds from the new coronavirus outbreak, a poll showed Monday.

In a survey conducted by Yonhap Infomax, the financial news arm of Yonhap News Agency, nine out of 19 experts polled expected the central bank to keep the base rate steady at a record low of 1.25 percent this week.

However, 10 out of the 19 experts expected a rate reduction next month, and the number grew to 14 for the first half.

“The number of people infected with Covid-19 [novel coronavirus] sharply has increased since mid-February, along with the need for policy measures to prepare for its economic fallout,” said Kong Dong-rak, an analyst at Daishin Securities.

Korea’s base rate stands at its current level following two rate cuts in July and October.

The bank board will hold its rate-setting meeting Thursday, when it is also scheduled to offer its latest growth outlook for the local economy.

A majority of the experts earlier anticipated the central banks board to keep the base rate unchanged in the first half, with just five of the 19 experts expecting a rate reduction before the end of March and only eight before the end of June.

“With the Covid-19 related uncertainties persisting, the negative impact on the economy and economic sentiment may not be removed easily,” said Kyobo Securities analyst Baek Yoon-min.

“The government too has acknowledged the need for active steps to defend the economy,” the analyst added.

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