SEOUL (Reuters) – South Korea’s central bank left interest rates at a 15-year high on Friday as stubborn inflation and strong export growth gave policymakers reasons to hold off easing policy.
The Bank of Korea (BOK) held its key rate at 3.50% at a policy review in Seoul, keeping it unchanged for a 10th straight meeting, as expected by all 39 analysts polled by Reuters.
The bank has argued it needs to see more progress on prices to gain confidence that they are moving towards the bank’s 2% target before lowering borrowing costs.
However, departing board member Suh Young-kyung, an inflation hawk, on March 26 signaled it may be time to “normalise” interest rates.
The consumer price index (CPI) advanced 3.1% in March year on year, the same pace as February after three months of easing, stoking views that it’s still too early for the BOK to consider easing.
Exports rose for a sixth straight month led by robust sales of chips, adding to the case for the BOK to keep rates high.
“Rising exports and stabilising consumer sentiment have given policymakers scope to wait. Risks stemming from the prospect of the Fed’s easing cycle being delayed also indicate that the BOK is likely to be patient,” said Kim Jin-wook, an economist at Citigroup.
Analysts expect the BOK to deliver a 25 basis-point cut in both the third and fourth quarters, taking the benchmark rate down to 3.00% by the end of this year from 3.50%, currently.
Investors are waiting to see who replaces two departing voting board members, Cho Yoon-Je and Suh, whose four-year terms finish April 20.
Governor Rhee Chang-yong holds a news conference at around 0210 GMT, which will be livestreamed via YouTube.
Source: Economy - investing.com
