South Korea freezes key rate at record low 0.5%

Bank of Korea (BoK) governor Lee Ju-yeol (pic) and six other monetary policy board members left its benchmark seven-day repurchase rate unchanged at an all-time low of 0.50%.

SEOUL: South Korea’s central bank yesterday froze its key interest rate at a record low as the continued Covid-19 pandemic offset the signs of economic recovery shown in recent economic indicators.

Bank of Korea (BoK) governor Lee Ju-yeol and six other monetary policy board members left its benchmark seven-day repurchase rate unchanged at an all-time low of 0.50%.

The BoK slashed its policy rate by 50 basis points in March 2020, before cutting it further by 25 basis points to the current level in May of the year to tackle an economic turmoil from the pandemic.

It was in line with market expectations. According to a Korea Financial Investment Association (KFIA) survey of 100 fixed-income experts, 98% predicted a rate freeze.

Recent economic indicators showed signs of recovery from the pandemic-hit downturn, but concerns lingered about the virus spread as the daily number of confirmed Covid-19 cases stayed in triple digits since November last year.

In the latest tally, the country reported 629 more cases of Covid-19 for the past 24 hours, raising the total number of infections to 138,311. The daily average caseload for the past week was 599.

Domestic demand improved with the launch of mass vaccinations in late February. The government aimed to form a herd immunity no later than November.

The BoK said in a statement that the recovery of the global economy has strengthened, supported by the economic stimulus in major countries, accelerated vaccinations and the relaxation of restrictions on economic activity.

The bank noted that South Korea’s private consumption has gradually emerged from its slump while its export has sustained their buoyancy and facilities investment has continued to recovery robustly.

Plastic card spending in the local market jumped 18.3% in April from a year earlier, keeping an upward trend for the third consecutive month.

Revenue by department stores surged 26.8% last month, and revenue by online retailers spiked 48.6% as people preferred to shop in the cyberspace amid the remaining worry about the pandemic.

The consumer sentiment index (CSI) hovered above 100 for three straight months through May, indicating optimists outnumbering pessimists over economic situations.

Consumer price gained 2.3% in April on a yearly basis, marking the fastest increase in 44 months since August 2017. It raised concerns about the high inflation, but the government attributed it to the supply-side inflationary pressures such as higher prices for farm goods and oil products. — Xinhua