The Bank of Korea's monetary policy board on Thursday moved to keep the nation's benchmark interest rate unchanged at the record low 1.25 percent for the second 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, while the global economy will maintain its weak recovery going forward, it will be affected by factors including changes in the monetary policies of major countries, the uncertainties related to Britain's exit from the European Union, and economic conditions in emerging market countries," the bank said.
Low inflation allowed the bank the flexibility to hold fire as consumer prices were up just 0.7 percent on year.
Core inflation climbed an annual 1.6 percent in July, slowing from 2.0 percent in the previous month.
On a monthly basis, both overall and core CPI added 0.1 percent after showing flat in June.
"The board forecasts that consumer price inflation will remain at a low level for the time being, and then gradually rise as the effects of the low oil prices diminish," the bank said.
The rest of the data was a mixed bag as exports continued to be hammered by a strengthening won.
South Korea had a merchandise trade surplus of $7.8 billion in July, following the $11.643 billion trade surplus in June- marking the 54th consecutive monthly surplus.
Exports slipped 10.2 percent on year to $41 billion after falling 2.7 percent in June; overall, exports have contracted in 19 straight months.
Imports tumbled an annual 14.4 percent to 33.3 billion after losing 8.0 percent in the previous month.
"The board forecasts that the domestic economy will sustain its trend of modest growth going forward, owing chiefly to expansionary macroeconomic policies, but in view of economic conditions domestically and abroad judges the uncertainties surrounding the growth path to be high," the bank said.
But South Korea's gross domestic product expanded a seasonally adjusted, annualized 0.7 percent on quarter in the second quarter of 2016, following the 0.5 percent gain in the first quarter.
On a yearly basis, GDP climbed 3.2 percent – also topping expectations for 3.0 percent and up from 2.8 percent in the three months prior.
"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, while paying attention to financial stability," the bank said.
by RTT Staff Writer
For comments and feedback: editorial@rttnews.com
Forex News
