SEOUL: South Korea's central bank kept its policy rate steady on Thursday and marginally raised its growth outlook for this year and next, even as the country faces a third wave of coronavirus infections.
The Bank of Korea kept the base rate steady at a historic low of 0.5% also as policymakers remain concerned about a red-hot property market. All 22 analysts in a Reuters poll had expected the move.
The central bank expects gross domestic product to shrink 1.1% this year from a previous forecast for a 1.3% contraction and sees GDP growing 3% in 2021, up from 2.8% previously.
Asia's fourth-largest economy returned to growth in the third quarter with support from fiscal and monetary stimulus, recovering from its sharpest contraction in more than a decade.
Preliminary exports data showed global demand for South Korean products rebounded in November, while industrial output saw its sharpest year-on-year growth in seven months in September.
But a third wave of infections prompted the government to tighten social distancing rules this week, threatening the budding recovery.
The BOK also flagged rising household debt as a key risk in its October meeting minutes, limiting the scope for further monetary easing.
"Further rate cuts are unlikely as it's time to allow previous cuts to flow through the economy. There are concerns about financial imbalances, and as inflation is expected to increase in a gradual manner, so policies will remain steady," said Park Seok-gil, economist at JP Morgan, before the meeting.
Investors are likely to focus on Governor Lee Ju-yeol's virtual news conference at 0220 GMT for any comments on a recent push by some lawmakers to revise the central bank's mandate to add the goal of job creation.
The government has pledged 310 trillion won ($274.83 billion) in fiscal spending to help cushion the blow from the pandemic, while the central bank has cut rates by a total of 75 basis points this year. - Reuters
Source: The Sun Daily
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