BOK freezes interest rate at 3.5 pct for 8th time

Jan 12, 2024, 09:18 am

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Bank of Korea (BOK) Gov. Rhee Chang-yong presides over a meeting at the Monetary Policy Committee meeting at the central bank in Seoul on Jan. 11, 2024./ Source: Bank of Korea

By AsiaToday reporter Lee Sun-young

South Korea’s central bank on Thursday froze the key interest rate at 3.5 percent. This marked the eighth straight time that the central bank has stood pat following rate freezes in February, April, May, July, August, October and November. The bank attributed its decision to a slowing downward trend in inflation and the remaining uncertainties of the South Korean economy.

Bank of Korea (BOK) Governor Rhee Chang-yong said that it would be premature to discuss a rate cut, saying the central bank would maintain a tightening stance for a long time. As Rhee said a rate cut will not likely be decided for at least another six months, the market is expecting that the central bank could cut the rate as early as July.

The BOK’s Monetary Policy Committee decided to leave the benchmark rate unchanged at 3.50 percent. Rhee said the decision to freeze the rate was unanimously reached with the members forming consensus.

The BOK has frozen its key interest rate for the eight consecutive time because it judged that prices are still high. “Although inflation has continued its underlying trend of a slowdown, it still remains high, and uncertainties regarding the outlook are also judged to be high. So it is appropriate to check internal and external policy conditions while maintaining the current tightening trend,” the central bank said in a statement.

The central bank said it will maintain a restrictive policy stance for a long time. “It is of paramount importance to achieve price stability by maintaining monetary tightening for a sufficiently long period of time until we are confident that inflation will converge on the target level,” Rhee said.

Rhee said that it is premature to consider a rate cut, but offered a personal outlook, saying it would not be easy to cut rates at least for the next six months.

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