South Korea’s central bank on Thursday froze its benchmark interest rate at a record low, refraining from altering the rate for 13 months in a row. Bank of Korea (BOK) Governor Lee Ju-yeol and six other monetary policy board members decided to put the seven-day repurchase on hold at 1.25 per cent. The policy rate was lowered to the current level last June, reports Xinhua news agency. It was in line with market expectations. According to a Korea Financial Investment Association (KFIA) survey of 200 fixed-income experts, 98 per cent of respondents predicted a rate freeze. Pressures rose on the BOK to raise its policy rate as the US Federal Reserve hiked its benchmark rate to a range of 1.00-1.25 per cent last month. If the Fed lifts its policy rate further, foreign capital would probably flow out of the South Korean financial market, dealing a heavy blow to the economy that depends heavily on global trade. Household debts kept a record-breaking trend as the record-low borrowing costs encouraged households to buy new home with borrowed money. The new government under President Moon Jae-in tightened standard for mortgage loans to control any speculative investment in the real estate market.
The BOK was widely forecast to follow suit of the new government in the foreseeable future. The top central banker recently indicated the need for a rate hike.