April 12, 2023 11:56
The Bank of Korea on Tuesday kept the key interest rate unchanged at 3.5 percent, the second freeze in a row amid a slowdown in private consumption and weak exports.
But BOK Governor Rhee Chang-yong said inflation is far from under control and markets are being too optimistic. "The market is jumping the gun," he said. "Price uncertainties remain high."
That suggests the key interest rate could rise to at least 3.75 percent later this year.
"We project economic growth this year to fall slightly below the 1.6 percent projection made in February," Rhee added.
As the global economy slumps, Korea's exports of semiconductors and other key products have slowed, while China's economic recovery is taking longer than expected.
Under those circumstances, the BOK felt hiking interest rates could have a negative impact on Korea's economy, especially after the collapse of Silicon Valley Bank in the U.S. and Credit Suisse in Europe.
The central banks of Canada and Australia also kept their key interest rates unchanged.
Bloomberg on Monday said the central banks of at least 20 out of 23 countries that account for 90 percent of the global economy are expected to halt their rate hike cycles and lower borrowing rates next year.
It predicted that the U.S. Federal Reserve will hike the base rate once more to 5-5.25 percent from the current 4.75-5 percent but slash it to 4.25 percent by the end of next year.
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