BOK expected to keep key rate steady, but cut growth outlook for 2017

Published on 12 Jan 2017, 5:16
올해 첫 금통위 하루앞두고 금리/성장률 변동 유력
The Bank of Korea is expected to keep its key rate steady, but cut its growth outlook... when officials gather tomorrow for the first monetary policy committee meeting of the year.
Shin Se-min reports.

The Bank of Korea is gearing up for its first monetary policy meeting of the year on Friday... after having cut the number of meetings from twelve to eight last year.
The bank is widely expected to keep its benchmark rate unchanged at the current record-low one-and-a-quarter percent,…
given the slow growth of the Korean economy, despite a moderate pickup in exports.
The BOK last cut the rate by a quarter-percent back in June,... in a bid to prop up the local economy.

The central bank is reportedly agonizing over its rate adjustment decision, after the U.S. Federal Reserve signaled it could raise rates at a faster pace than previously anticipated.
After the Fed raised its key rate by 25-basis points in December, there were concerns in Korea about a potential foreign capital flight.

"The BOK is in a difficult position,... as the pressure to boost Korea's base rate will continue to linger,... and even as the Fed's move had been foreseen,... the Korean economy is still looking bad."

That's because a rate hike would act as a drag on Korea's staggering household debt, hovering over 1-point-1 trillion U.S. dollars,... while a rate cut would only prompt more Koreans to take out loans.
On top of that,... consumer sentiment dropped to a near eight-year low late last year,... with the current political scandal discouraging economic activity.
Also at the policy meeting scheduled for Friday, the Bank of Korea will unveil its growth target for the year,… which is likely to be revised downward from its previous projection of 2-point-8 percent in October.
A number of research organizations had revised Korea's growth outlook down into the mid-two-percent range, including the government, which cut its forecast to 2-point-6 from an initial 3-percent.
Shin Se-min, Arirang News.

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