SEOUL (Reuters) – South Korea’s reserve bank will likely keep rate of interest on hold on Thursday as the central bank weighs issues about rising home debt and home rates with the requirement to support a coronavirus-hit economy.
SUBMIT PHOTO: The logo of the Bank of Korea is seen on the top of its building in Seoul, South Korea, March 8,2016 REUTERS/Kim Hong-Ji
The Bank of Korea (BOK) was expected to keep its base rate KROCRT= ECI steady at a record low of 0.50%, according to all 26 experts surveyed by Reuters, after a total of 75 basis points rate cuts considering that March.
Thirteen of 15 experts who offered forecasts for end-2021 saw the BOK holding rates throughout this year and next. One projection a rate cut in 2021 and the other a rate walking.
South Korea’s economy plunged into economic downturn in the second quarter of 2020 as the coronavirus pandemic damaged exports and company activity, regardless of efforts by the government and the central bank to support Asia’s fourth-largest economy.
” It holds true that the dismal financial condition warrants an accommodative financial policy,” said Kim Jina, expert at IBK Financial investment & Securities.
” However the bank will need to see whether the revival in COVID-19 results in more deterioration of economic signs, that makes any (immediate) policy action less immediate.”
This week’s policy evaluation comes as South Korea has actually seen a rise in coronavirus cases and is thinking about deploying the toughest phase of social-distancing guidelines, where schools and companies would be urged to close.
But minutes from the most recent BOK financial policy conference showed that while board members agreed rates needed to remain loose for the time being, some flagged the requirement to pay closer attention to monetary imbalances as family financial obligation increases along with home rates.
” Issues concerning rising housing rates and home borrowings will hold back the BOK from reducing even more,” said Defa Zhao from Continuum Economics.
The central bank is presently expecting gross domestic product to fall 0.2%this year – the worst because the 1998 financial crisis – and is anticipated to modify down this forecast at the meeting today.
It reveals its rate decision around 0100 GMT on Thursday and the guv’s interview will be relayed live on YouTube from 0220 GMT.
Modifying by Ana Nicolaci da Costa
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