BOK keeps rate unchanged at 3.5% for ninth straight meeting

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BOK keeps rate unchanged at 3.5% for ninth straight meeting

Published: 22 Feb. 2024, 09:50

JIN MIN-JI
jin.minji@joongang.co.kr

Bank of Korea Gov. Rhee Chang-yong at the Monetary Policy Board meeting on Thursday, where the interest rates remained unchanged at 3.50 percent for the ninth consecutive meeting. [BOK]

The Bank of Korea (BOK) kept the interest rate unchanged at 3.50 percent for the ninth straight meeting on Thursday amid moderating inflation and growing household debt.

The freeze was widely expected after BOK Gov. Rhee Chang-yong said a month earlier that the chance of any further rate increases had grown weak with the interest rate already high and inflation slowly yet continuously easing.

According to the Korea Financial Investment Association (Kofia), 100 percent of surveyed bond experts, including analysts, expected the BOK’s Monetary Policy Board to freeze the rate, up from 98 percent ahead of the previous rate-setting meeting in January.

A total of 100 people from 55 institutions took part in the survey for a week from Feb. 8.

“The BOK board is anticipated to unanimously keep the interest rate steady in the February meeting as the higher-than-expected U.S. consumer price index in January is projected to delay the start of the Federal Reserve’s rate cuts,” said Kofia on Tuesday, citing the experts.

The figure came to 3.1 percent on a yearly basis last month, higher than the projected gain of 2.9 percent. Economists expect the Fed to start cutting the federal funds rate in June.

Korea’s headline inflation fell to 2.8 percent in January on a yearly basis, down from 3.2 percent the previous month.

“We’re seeing signs of inflation slowing, but there’s a need to keep a restrictive monetary policy at this point as inflation remains above the target rate and there are uncertainties in the speed of the inflation moderation,” said Ahn Ye-ha, an analyst at Kiwoom Securities in a report on Monday.

“Expectation for an interest rate cut is likely to spread again as we pass the first half of the year due to a rise in anticipation for rate cuts amid slowing inflation and weak domestic demand due to the aftereffects of the high interest rate.”

“Three conditions need to be met before Korea starts cutting the rate: signs of a rate cut by the Fed, price stabilization and household debt stabilization,” said Kang Seung-won, an analyst at NH Investment & Securities, in a report on Monday. “Of the three, the most important would be the Fed’s rate cut, which has become less likely.”

Federal Reserve Chair Jerome Powell said last month that a rate cut in March is not likely, adding that the central bank would not be comfortable enough to consider a cut given a lack of confidence that inflation is tracking sustainably toward the target of 2 percent by its next meeting in March.

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