Bank Of Korea Holds Benchmark Lending Rate Steady At 1.25%

The Bank of Korea's monetary policy board on Thursday decided to hold the nation's benchmark interest rate steady at the record low 1.25 percent for the fifth straight month.

That followed June's surprise rate cut by 25 basis points from 1.50 percent after 10 straight meetings without a move.

"The board forecasts that the global economy will maintain its moderate recovery going forward, while being affected by factors such as changes in US monetary policy and the directions of the new US government's economic policies," the bank said.

Steady inflation allowed the bank the flexibility to hold fire as consumer prices were up 1.3 percent on year in October – up marginally from 1.2 percent in September.

On a monthly basis, inflation was up 0.1 percent following the 0.3 percent gain in September.

Core inflation, which excludes food prices, was flat on month and up 1.8 percent on year after adding 0.2 percent on month and 1.7 percent on year a month earlier.

"The board forecasts that consumer price inflation will gradually rise, due mainly to the weakening influence of the low oil prices," the bank said.

Much of the other economic data was good enough for the bank to feel satisfied with no move.

South Korea's gross domestic product expanded 2.7 percent on year in the third quarter – beating forecasts for an increase of 2.4 percent, although it slowed from 3.3 percent in the previous three months.

On a seasonally adjusted annualized basis, GDP gained 0.7 percent – also exceeding forecasts for 0.5 percent but down from 0.8 percent in the three months prior.

Industrial production in South Korea was up 0.3 percent on month in September, following the 2.4 percent decline in August.

On a yearly basis, industrial production sank 2.0 percent after advancing 2.2 percent in the previous month.

"Looking ahead, the board will conduct monetary policy so as to ensure that the recovery of economic growth continues and consumer price inflation approaches the target level over a medium-term horizon," the bank said.

by RTT Staff Writer

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