South Korea’s central bank left its benchmark rate unchanged for the fourth straight session on Thursday and pledged to retain the restrictive stance for a considerable time.
The Monetary Policy Board of the Bank of Korea, governed by Rhee Chang-yong, unanimously voted to hold the Base Rate at 3.50 percent, as expected.
The central bank has hiked its policy rate by a total 300 basis points since August 2021, taking it to the highest level since 2008.
Policymakers said it would be appropriate to maintain the current restrictive policy stance.
The board noted that inflation is forecast to pick up again to around the 3 percent level since August and to remain above the target for a considerable time.
Nonetheless, inflation is expected to be generally consistent with the May forecast of 3.5 percent this year. But core inflation will be slightly above the previous forecast of 3.3 percent due to accumulated cost pressures and favorable demand in services, the bank said.
There will be a considerable period of time before domestic inflation converges on the target level, the bank noted. Further, there were uncertainties related to the degree of further tightening of monetary policy in major economies and its impact on the foreign exchange.
Therefore, the board deems it warranted to maintain the restrictive policy stance for a considerable time.
Further, the bank confirmed its economic growth projection for this year at 1.4 percent. While growth in the first half is set to be slightly above the original forecast due to the easing of sluggish exports, uncertainties around the growth path have increased owing to the slow recovery in China, the bank noted.
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