By Kwanwoo Jun
South Korea’s central bank stood pat on interest rates for a sixth consecutive time, as expected, as the economy showed signs of cooling while uncertainty in the Middle East grew.
The Bank of Korea left its benchmark seven-day repurchase rate unchanged at 3.50% on Thursday, unfazed by a recent pickup in inflation, which had been cooling for months.
BOK Gov. Rhee Chang-yong said the decision was unanimous at the seven-member policy board, with five members still leaving the door open for more rate increases, if needed, to curb inflation.
Rhee said higher oil prices could prompt the central bank to raise its inflation forecast in the growth outlook update due November.
All 27 analysts surveyed by The Wall Street Journal ahead of the bank’s decision had forecast no change to the rate in October. They said they expect the bank to hold the policy rate steady until the end of 2023, with some penciling in rate cuts in 2024 to support economic growth and ease financial stress for households.
Analysts said headline inflation picked up on volatile oil prices for a second straight month in September but core inflation, which excludes food and energy prices, was still trending lower.
South Korea’s economy has been cooling despite some recent signs of a recovery, with exports shrinking year-over-year for a 12th consecutive month in September.
The central bank in its latest growth outlook in August said it expects the country’s 2023 gross domestic product to grow 1.4% after expanding 2.6% in 2022.
The bank expects inflation to average 3.5% this year, above its annual 2.0% target but easing from 5.1% last year.
“However, upside risks to inflation have increased due to the effects of higher global oil prices and…the Israel-Hamas conflict,” the bank said in a policy statement Thursday. “Accordingly, it is judged that the timing of consumer price inflation converging on the target level is more likely to be delayed than previously expected.”
Write to Kwanwoo Jun at [email protected]
Read the full article here