December 01, 2023 10:51
The Bank of Korea froze the key interest rate once again in its last monetary policy meeting of the year on Thursday as it lowered its economic growth outlook for next year from 2.2 percent to 2.1 percent citing weaker domestic consumption despite rebounding exports.
If the Israel-Hamas war intensifies, the BOK warned that Korea's growth rate could fall to 1.9 percent next year, below the country's potential growth rate of two percent.
The central bank has kept the key rate steady at 3.5 percent since raising it in January. The U.S. Federal Reserve is expected to lower the federal funds rate in the first half of next year, but the BOK intends to keep its own rate unchanged for now.
"Inflation is expected to remain high next year, which will make things extremely tough for low-income, heavily indebted or financially vulnerable people," BOK Governor Rhee Chang-yong said.
Nonetheless Rhee said the central bank will not slash the key rate for at least another six months because doing so could end up making real estate prices surge again. "The economy should be boosted through restructuring rather than fiscal or monetary policies," he said.
Four out of six committee members hinted at an additional rate hike, one fewer than during the meeting in October, but another member who had suggested a rate cut last time has now retracted his position.
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