Bank of Korea freezes benchmark rate at 1.25 percent

Bank of Korea Governor Lee Ju-yeol at a monetary policy committee meeting held at the bank in central Seoul on Thursday morning. [BOK]

The Bank of Korea froze the benchmark rate at 1.25 percent on Thursday.

The monetary policy committee of the Bank of Korea decided to hold the interest rate steady amid market uncertainties caused by inflation, Russia’s threat to invade Ukraine and a continuous rise of Covid-19 cases.

The central bank upped that rate by 0.25 percentage points in January and November last year.

The meeting took place two weeks ahead of Korea’s presidential election on March 9 and the Federal Open Market Committee Meeting scheduled to take place on March 15 and 16.

“An additional rate hike is expected in May,” said Ahn Ye-ha, an analyst at Kiwoom Securities. “Considering the presidential election in March and the completion of Bank of Korea Governor Lee Ju-yeol’s term in March, an additional rate hike is expected to take place in May rather than April with the announcement of adjusted economic growth.”

The next monetary policy committee meeting will take place in April.

Ahn added the central bank “isn’t expected to get loose on monetary tightening” considering inflation.

Kong Dong-rak, an economist at Daishin Securities, projected the central bank would up the rate two more times this year in May and July. Kong cited inflation, disruption in supply chain management and an increase in oil prices.

On the same day, the central bank maintained Korea's growth rate forecast for this year at 3 percent. It projects 2.5 percent growth next year and forecast consumer prices to stand at 3.1 percent this year and 2 percent the following year.

BY JIN MIN-JI [jin.minji@joongang.co.kr]