Bank of Korea keeps key interest rate at 3.5% while cutting economic growth outlook

기준금리 3.5%로 3연속 동결 올해 성장률 1.4% 전망

South Korea's central bank said Thursday that the key interest rate will remain at 3 and a half percent with recent relatively eased inflation and some worsening economic data behind the decision.
Our finance correspondent Lee Rae-hyun reports.

The Bank of Korea has once again frozen its key interest rate.
The central bank announced the decision on Thursday after a monetary policy committee meeting.
The base interest rate stays at 3-point-5 percent.

"Inflation is slowing down, but is expected to stay above the target level for a while, so we have decided to keep our tightened monetary policy. The Board of Governors voted unanimously to freeze the rate."

Now this is the third time in a row that the BOK has decided to keep the rate unchanged.
The central bank cut the base rate in 2020 amid concerns over the economic recession due to COVID-19 but started to raise the rates in August 2021.
Analysts say with the consumer price index coming down to the 3 percent range May's decision reflects the central bank's intention to avoid throwing cold water onto easing inflation.
Economic uncertainty was also one of the factors for the rate freeze.
Amid sluggish exports, South Korea's real GDP for the first quarter of this year expanded slightly just point-3 percent from the previous quarter barely avoiding negative growth.
The country's current account balance in March, too, narrowly avoided a deficit for three consecutive months thanks to dividend inflows from overseas subsidiaries of South Korean companies.
However, South Korea's trade balance remained in the red last month for the 14th month in a row.
Crisis in the financial market also seems to have affected the decision as rate hikes may intensify bank and card company anxiety which is raised due to the collapse of the Silicon Valley Bank.
After the monetary policy meeting, the Bank of Korea also cut this year's economic growth rate from 1-point-6 percent to 1-point-4 percent considering the recent worsening economic index and the weak impact of China's reopening.
The consumer price index is expected to be at 3-point-5 percent.
Following the rate freeze, the market widely expects rate hikes to end at this point, at least for now.
With the central bank's decision to hold the rate, the interest rate difference between South Korea and the U.S. now stands at 1-point-7-5 percentage points.
Lee Rae-hyun, Arirang News.

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2023-05-25, 12:00 (KST)