1. South Korea freezes rates in first meet under President Moon Jae-in

South Korea freezes rates in first meet under President Moon Jae-in

South Korea's central bank on Thursday froze its benchmark interest rate at the record-low level in its first rate-setting meeting under the new government.

By: | Seoul | Published: May 25, 2017 11:20 AM
Any new government tended to refrain from raising its policy rate in an early phase as higher interest rate could lead to hurt growth momentum of the economy. (Reuters)

South Korea’s central bank on Thursday froze its benchmark interest rate at the record-low level in its first rate-setting meeting under the new government. Bank of Korea (BOK) Governor Lee Ju-yeol and six other policy board members decided to keep the seven-day repurchase rate on hold at an all-time low of 1.25 per cent, Xinhua news agency reported.

It was in line with market expectations. According to a Korea Financial Investment Association (KFIA) survey of 200 fixed-income experts, 100 per cent predicted the rate freeze. The prediction was based on the launch of the new government. President Moon Jae-in took office after winning a landslide victory in the May 9 presidential election.

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Any new government tended to refrain from raising its policy rate in an early phase as higher interest rate could lead to hurt growth momentum of the economy. Exports, which account for about half of the South Korean economy, posted a double-digit expansion in recent months, but private consumption remained lackluster amid massive household debts.

The government-led corporate restructuring in the troubled shipbuilding and shipping industries was underway, weighing down on the economic recovery. Pressures, however, were growing on the BOK to hike its policy rate on expectations for the US Federal Reserve to raise its benchmark rate as early as June.

The Fed lifted its policy rate to a range of 0.75-1 per cent, coming closer to the BOK’s benchmark rate of 1.25 per cent. Expectations were running high for the new government’s economic policy that could lead to the recovery.

The Moon Jae-in government planned to draw up a supplementary budget later this year, which is focused solely on job creation.

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