BOK likely to freeze key rate at record low: experts

An illustration of Bank of Korea Gov. Lee Ju-yeol keeping the policy rate unchanged. (Yonhap)

South Korea’s central bank is widely expected to freeze its base rate at a record low of 0.5 percent this week over lingering economic uncertainty with a flare-up in new coronavirus cases, experts said Monday.

The Bank of Korea is slated to hold its monetary policy board meeting slated for Thursday.

“Affected by the virus resurgence, the nation’s job market and private spending have remained sluggish. So, there’s a high chance for the central bank to maintain its base rate frozen near-zero,” said Kim Jung-sik, a professor of economics at Yonsei University. 

The number of employed people dipped by 982,000 on-year to 25.8 million in January, the largest annual job loss since 1998, when the Asian financial crisis hammered the economy, according to data from Statistics Korea. 

Also, total card payment including that of credit and debit cards shrunk by 2 percent last month, extending a downtrend from a 3.9 percent decline in December last year, data showed. 

The BOK trimmed the benchmark interest rate to an all-time low of 0.5 percent in May last year after delivering an emergency rate reduction to 0.75 percent in March, to inject liquidity into banks, businesses and households hit hard by the COVID-19 crisis. 

The anticipated interest freeze, if confirmed, will be the sixth of its kind. The central bank froze the key rate at its rate-setting meetings in July, August, October, November last year as well as January this year.

“Working in tandem with the government’s expansionary fiscal policy, the central bank is likely to continue with its easing monetary drive,” Kim Yu-mi at Kiwoom Securities said.

Discussions have been underway between the Ministry of Economy and Finance and related ministries to supply a fourth round of COVID-19 relief funds. A draft plan of the additional stimulus package, including the time and scale of handouts are likely to be unveiled as early as this week, officials said.

By Choi Jae-hee (cjh@heraldcorp.com)