BOK likely to hold key interest rate steady

The Bank of Korea (BOK) is widely expected to hold its key interest rate steady at a review next week but appears on course to raise them in May, a Reuters poll showed on Friday.

The economists predicted that the central bank would keep its benchmark interest rate unchanged at 1.50 per cent while assessing the effects of its recent rate rise and global economic conditions.

In November, the BOK raised the base rate by 25 basis points from a record-low of 1.25 per cent in its first tightening in six years on mounting signs that Asia’s fourth-largest economy had firmly bottomed.

The lender upgraded it 2018 GDP outlook to 3.0 per cent from 2.9 per cent last month, but flagged concerns about economic uncertainties and soft inflation.

The South Korean economy unexpectedly shrank in the fourth quarter dragged by a slump in car exports.

South Korea’s exports for the first 20 days of February contracted 3.9 per cent from the comparable period a year before as there were fewer working days this year due to the Lunar New Year holidays.

The Feb. 27 meeting of the BOK’s Monetary Policy Committee will be the last Governor Lee Ju-yeol chairs before his term ends at the end of March, and analysts expect Lee not to change policy.

President Moon Jae-in has yet to nominate Lee’s successor.

Eight of 14 economists surveyed expect the BOK to lift the rate in May, with the others seeing a rise later.