Published : Feb. 9, 2012 - 16:18
The Bank of Korea kept the benchmark interest rate unchanged at 3.25 percent, as widely expected, for the eight straight month as uncertainties continue to hover over inflation and growth outlooks.
The decision came as the country continues to face slowing exports and greater external risks such as the protracted eurozone debt crisis.
The bank’s monetary policy committee said that economic indicators in the U.S. such as employment have shown improvement, but economic activity in the eurozone continues to be sluggish.
“Growth in emerging market economies has continued to exhibit signs of weakening, due mostly to slowing exports,” the policy-setting committee said, adding that the pace of global economic recovery was “very moderate.”
Analysts increasingly project that the BOK will keep the rate steady throughout the year due to the risk factors that show few signs of abating.
Complicating the matter for the central bank is that the country’s exports, which account for 50 percent of its gross domestic product, are losing pace due to the debt woes in Europe.
The Korean economy grew 0.4 percent in the fourth quarter of last year. It is also struggling with slump-laden domestic demand in recent months, with snowballing household debts weighing on consumer sentiment.
Consumer prices are also in an unstable state as public service charges such as bus fares are set to be raised soon, putting more pressure on the policymakers who are keen to strike a balance between growth and taming inflation.
Since July 2010, the BOK has raised borrowing costs by 1.25 percentage points in five steps in a bid to curb inflation.
By Yang Sung-jin (
insight@heraldcorp.com)