Central Bank of South Korea to delay the rates
2023.02.23 02:18
Central Bank of South Korea to delay the rates
By Ray Johnson
Budrigannews.com – The monetary tightening campaign that began 18 months ago would not resume if inflation followed the anticipated path toward moderation, the South Korean central bank stated on Thursday.
After the central bank kept its policy interest rate at 3.50%, Governor Rhee Chang-yong of the Bank of Korea told reporters that it was time to stop and watch until the uncertainties were resolved.
Rhee did not rule out the possibility of additional increases, but he repeatedly stated that if the annual inflation rate decreased to the forecasted 3% by the end of the year, no further increases would be necessary.
In comparison to July’s peak annual rate of 6.3%, consumer prices in February were 5.2% higher than a year earlier.
Rhee stated, “You stop and wait for the fog to clear when you are at the wheel and the thick fog is blocking your vision.” We are in that predicament, so it is time to halt and wait.”
In a Reuters poll, 42 economists predicted that the central bank would make the same policy rate decision.
After the announcement, shares rose, helped along by a rebound in U.S. stock index futures. The victory was also stronger.
Kong Dong-rak, an economist at Daishin Securities, stated that Rhee’s remarks appeared to be intended to alert markets to the uncertain outlook.
According to Kong, “I believe his intention was to give a sense of tension about the prospects for policy, dissuading investors from betting too much on a cut.”
Additionally, the economic forecasts were slightly altered by the central bank. Compared to its November forecast of 1.7 percent, it now anticipates a 1.6 percent increase in the full-year 2023 GDP. It predicted a 3.5% increase in average consumer prices in 2023 compared to the previous year. It had earlier anticipated a 3.6% increase.
The board’s monetary policy decision was the first since February 24, 2013, when it kept the policy rate the same. It came as economic growth appeared to be losing steam, primarily due to falling exports.
Economy ministers were instructed by President Yoon Suk-yeol to do everything in their power on Thursday to avert the widely anticipated decline in exports in 2023.
The tightening cycle began in August 2021 and has resulted in interest rate increases totaling 300 basis points. In the same Reuters survey, the majority of economists thought the cycle had ended.
Additionally, the survey had predicted that the policy rate would not change until 2023.
