The Bank of Korea (BOK), which has cut its rate by 50 basis points this year, also repeated that it expects domestic demand to continue to support a recovery of the country's economy while "the trend of declining exports has persisted."
The BOK noted that the sentiment of economic agents had "improved somewhat," a slight change compared to October's policy statement in which the central bank said the improvement in the sentiment of economic agents "has been inadequate."
Last month the BOK trimmed its growth forecast for this year to 2.7 percent from 2.8 percent forecast in July.
In the third quarter of this year, South Korea's Gross Domestic Product expanded by 1.2 percent from the second quarter for annual growth of 2.6 percent, up from 2.2 percent.
The BOK also repeated its forecast that inflation will "continue at a low level," mainly due to the impact of low oil prices. In October the inflation rate rose to 0.9 percent from 0.6 percent due to higher agricultural prices and service fees.
The Bank of Korea issued the following statement:
"The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.50% for the intermeeting period.
Based on currently
available information the Board considers that the trend of economic recovery
in the US has been sustained, and that the modest improvements in the euro area
have continued. Economic growth in emerging market countries including China
has meanwhile continued to slow. The Board forecasts that the global economy
will maintain its recovery going forward, albeit at a moderate pace, centering
around advanced economies such as the US, but judges that the possibilities
exist of its being affected by heightened international financial market
volatility due for example to a shift in the US Federal Reserve’s monetary
policy, and by the weakening of economic growth in emerging market countries.
Looking at the Korean
economy, although domestic demand activities such as consumption and investment
have sustained their paces of recovery, while economic agents’ sentiments have
improved somewhat, the trend of declining exports has persisted. On the
employment front, the number of persons employed has increased steadily, and in
October the unemployment rate fell compared to that in October of last year
while the employment-to-population ratio maintained the same level. The Board
forecasts that the domestic economy will continue its recovery going forward,
centering around domestic demand activities, but in view of external economic
conditions judges the uncertainties surrounding the growth path to be high.
Consumer price
inflation rose from 0.6% the month before to 0.9% in October, due mainly to
expansions in the extents of increase in agricultural product prices and in
service fees. Core inflation excluding agricultural and petroleum product
prices also rose to 2.3%, from 2.1% in September. Looking ahead the Board
forecasts that inflation will continue at a low level, due mainly to the
effects of the low oil prices. In the housing market, the upward trends of
sales and leasehold deposit prices have persisted in both Seoul and its
surrounding areas and the rest of the country.
In the domestic
financial markets, stock prices, after having risen in line mostly with
increases in stock prices in major countries and with net inflows of securities
investment funds of foreigners, have fallen back as the likelihood of a policy
rate hike by the US Federal Reserve has grown. After having appreciated, the
Korean won has depreciated against both the US dollar and the Japanese yen. Long-term
market interest rates have risen, in response mainly to increases in interest
rates in major countries and the improvements in domestic economic indicators.
Bank household lending has sustained a trend of increase at a level
substantially exceeding that of recent years, led by mortgage loans.
Looking ahead, while
working to sustain the recovery of economic growth, the Board will conduct
monetary policy so as to maintain price stability over a medium-term horizon
and pay attention to financial stability. In this process it will closely
monitor the trend of increase in household debt and external risk factors such
as any changes in the US Federal Reserve’s monetary policy or in economic
conditions in emerging market countries including China, as well as the trends
of capital flows."
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