Bank of Korea holds rate at 3.00%, sees growth well above August forecasts
In short
The Bank of Korea's Monetary Policy Board kept the base rate at 3.00% on 22 October, with all seven members in favour, Newsis reported. It said growth this year and next would be well above its August forecasts of 3.3% and 2.9%, and that next year's inflation would exceed its earlier forecast.
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The Bank of Korea's Monetary Policy Board kept the base rate at 3.00% on 22 October, according to Chosun Ilbo and Newsis. Newsis reported that all seven board members voted in favour of the hold and described the decision as a pause in tightening. [ 2 , 4 ]
In its policy statement the board said the domestic economy continued to grow faster than expected on strong exports and investment, and that a favourable semiconductor cycle should keep exports and investment rising strongly. It said this year's and next year's growth are expected to be well above the August forecasts of 3.3% and 2.9%. Consumption is expected to recover gradually as incomes improve, it added. [ 2 , 4 , 6 ]
On prices, the board said consumer prices and core prices (excluding food and energy) each rose in the high 2% range in September, at 2.9% and 2.8%. It expects prices to keep rising above the target level for some time as higher cost pressure passes through and demand-side pressure grows. This year's consumer and core inflation should broadly match the August forecasts of 2.7% and 2.5%, but next year's should exceed the earlier forecasts of 2.3% and 2.5%. [ 2 , 4 , 6 ]
The board said it judged it necessary to hold the rate while checking how risks at home and abroad develop and what effect the two earlier increases have had, given higher uncertainty over the Middle East and the monetary and fiscal policies of major countries. Newsis reported that the statement says future policy will weigh price and economic trends and financial stability in deciding the timing and speed of further increases. The bank had raised the rate by 0.25 percentage points at each of the July and August meetings, Newsis reported. [ 2 , 4 ]
The statement also cited risks, including those from the Middle East situation, the extent to which the semiconductor expansion spreads to domestic demand, and changes in financial conditions. For prices, it pointed to uncertainty over oil prices and the exchange rate, the pace of domestic demand improvement and the spread of wage increases. On financial stability, it said attention should stay on imbalance risks tied to the capital-region housing market and household debt. Newsis added that the won-dollar rate fell considerably despite a stronger US dollar, which the bank attributed in part to better foreign-exchange supply and demand from a large current-account surplus. [ 2 , 4 , 6 ]
Chosun Ilbo reported that Deputy Prime Minister Lee Hyung-il (이형일) had said this year's growth would be 3.4% to 3.6%, above the bank's forecast. It wrote that Governor Shin Hyun-song (신현송) has cited demand-side price pressure as a reason to raise the rate and that high growth adds to such pressure. The paper said a November hike becomes more likely if price pressure persists, while Korea Economic Daily said attention is on whether the tightening cycle will lengthen. [ 2 , 6 ]
Why it matters
The board said it will decide the timing and speed of any further increases after reviewing price and economic trends. Korea Economic Daily noted that attention is on whether the central bank's tightening cycle will lengthen, and Chosun Ilbo said a November hike becomes more likely if price pressure persists.
Key facts
- The Bank of Korea's Monetary Policy Board kept the base rate at 3.00% on 22 October. [ 2 , 4 ]
- All seven board members voted to hold the rate, according to Newsis. [ 4 ]
- The board expects growth this year and next to be well above its August forecasts of 3.3% and 2.9%. [ 1 , 2 , 4 , 5 , 6 ]
- Consumer prices and core prices rose 2.9% and 2.8% in September. [ 2 ]
- This year's consumer and core inflation is expected to broadly match the August forecasts of 2.7% and 2.5%, while next year's is expected to exceed the earlier forecasts of 2.3% and 2.5%. [ 2 , 4 , 6 ]
- The bank raised its rate twice earlier, in July and August. [ 2 , 4 ]
Confirmed by several sources
- The Bank of Korea kept its base rate at 3.00% on 22 October. [ 2 , 4 ]
- The bank expects growth this year and next to be well above the August forecasts of 3.3% and 2.9%, citing strong exports and investment and a favourable semiconductor cycle. [ 2 , 4 , 6 ]
- The bank expects next year's consumer and core inflation to exceed its earlier forecasts of 2.3% and 2.5%, while this year's broadly matches the August forecasts of 2.7% and 2.5%. [ 2 , 4 , 6 ]
Still unclear
- Whether the board will resume raising the rate at its November meeting. Only Chosun Ilbo says a November hike becomes more likely if price pressure persists; the board's statement, as reported by Newsis, says only that timing and speed of further increases will be decided.
- Whether the tightening cycle will be prolonged. Korea Economic Daily says this is a matter of attention; no document gives an answer.
- How growth will actually develop. The board and Korea Economic Daily say the outlook faces uncertainty over the Middle East situation, the extent of the semiconductor expansion's spillover to domestic demand, and financial conditions.
What local media are saying
Timeline, local time
- Yonhap published a breaking-news item quoting the board on growth well above 3.3% this year. [ 1 ]
- Chosun Ilbo published its report on the higher growth outlook and continued price rises. [ 2 , 3 ]
- Newsis reported the rate hold and the unanimous vote. [ 4 ]
- Seoul Economic Daily published a breaking-news item on growth exceeding 3.3% this year and 2.9% next year. [ 5 ]
- Korea Economic Daily published its report on the outlook for growth and prices. [ 6 ]