The BOK held its benchmark rate at 3.50% for an eighth meeting in January and hinted it may pivot towards monetary easing along with its global peers, an outcome correctly forecast by all 38 economists polled by Reuters.
“It is necessary to maintain a tightening stance until there is confidence that inflation is settling at the target level,” one of the six board members said.
While overall inflation is cooling, measures stripping out more volatile food and energy prices have come down more slowly and policymakers pointed out upside from supply-side risks persist amid a war in Ukraine.
South Korea’s annual consumer inflation eased for a second month in December to 3.25% and came in below market expectations, backing policymakers’ outlook that price pressures will gradually ease through 2024.
The consensus from analysts is that the BOK will start cutting rates in the third quarter of this year, but as price pressures soften, some are betting on an earlier start to policy easing.
One other board member said while the economy faces risks from project financing loans going sour amid the debt crisis at builder Taeyoung Engineering & Construction, any jitters related to the sector need to be dealt with targeted support measures outside monetary policies.
Source: Economy - investing.com
