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Economy

Bank Of Korea Keeps Key Rates Steady At 1.25 Percent For 8th Straight Month

By February 23, 2017 at 6:36 am
The BOK's Monetary Policy Board held its policy rate at an all-time low of 1.25 percent for an eight straight month in February. (Photo : Getty Images)

The Bank of Korea on Thursday kept its key rate unchanged for an eighth straight month in February, opting to support growth as the economy faces a string of uncertainties ranging from ballooning household debt to additional US rate hikes this year.

The central bank's Monetary Policy Board held its policy rate at an all-time low of 1.25 percent. Last June, the BOK made an expected rate cut, sending the rate to its lowest level to stimulate the slow economy amid a prolonged economic weakness in Asia's fourth-biggest economy.   

A Reuters poll showed that all 20 analysts surveyed before the policy rate decision forecast the base rate to stay steady on Thursday.

The board said that its monetary policy will ensure the stabilization of consumer price inflation over the medium term and continuation of the economic growth recovery while keeping financial stability in check.

Another factor for the BOK decision are concerns over possibly increasing trade protectionism under the new US government as South Korean exports have started to bounce back.

BOK Governor Lee Ju-yeol downplayed the possibility that the US will designate South Korea as a currency manipulator, though he thinks the South Korean economy could suffer a negative impact if China is tagged as a currency manipulator by Washington.

The BOK is also closely monitoring the burgeoning household debt. Last quarter, debt grew at its fastest annual pace in over a decade, according to data released earlier this week. Household credit is comprised of credit card spending and household loans.

Household debt in South Korea reached an all-time high 1,344.3 trillion won in the fourth quarter of 2016, up 11.7 percent from 1,203.1 trillion won in the year-earlier period, according to preliminary BOK data.

The board also said it will keep an eye on the progress of the US Federal Reserve's monetary policy normalization.

In December, the Fed raised its key rate by a quarter of a percentage point. The Fed is widely expected to raise rates three more times this year. 

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