SEOUL: The Bank of Korea kept its benchmark interest rate unchanged on Thursday (Oct 22) but maintained a hawkish stance by upgrading its economic growth forecasts and remaining upbeat about the country’s export momentum.
The seven-member monetary policy board at the BOK voted to keep the seven-day repurchase rate at 3 per cent, a decision that was forecast by all 34 analysts surveyed by Reuters.
The central bank said that further tightening remains on the table, stating it “will decide the timing and pace of future increases” while assessing inflation, financial stability and domestic economic trends.
“The growth rates for this year and next year are expected to be considerably higher than the August forecasts of 3.3 per cent and 2.9 per cent, respectively,” the BOK said in a statement, adding a pause on Thursday was needed to evaluate external risks and the lagging effects of its back-to-back hikes in July and August.
It also said that both headline inflation and core inflation for next year will exceed its previous forecasts.
“The Bank of Korea left its policy rate unchanged at 3 per cent at today’s meeting, but we doubt this marks the end of the tightening cycle, and have pencilled in one hike for the BOK’s final meeting of the year in November,” Gareth Leather, an analyst at Capital Economics said in a note after the decision.
The July and August increases were the central bank’s first consecutive hikes in more than three years, after which Governor Shin Hyun Song said a gradual pace of tightening was preferred.
Shin, however, reiterated at an International Monetary Fund event on Oct 13 that policy would remain restrictive until inflation converges to its target.
Headline consumer inflation slowed to 2.9 per cent in September from 3.1 per cent in August, remaining above the bank’s 2 per cent target.
Exports are powering ahead thanks to global spending on artificial intelligence. Shipments from January to September topped US$800 billion for the first time ever.
With growth expected to remain firm and inflation above target, median forecasts in the survey showed the BOK raising its base rate to 3.25 per cent at its November meeting, in line with the BOK’s dot plot projection.
Shin will hold a news conference at 0210 GMT (10.10am Singapore time).