Korea's central bank will likely hold its key rate steady this month, extending its wait-and-see mode amid what many observers have called mild signs of recovery, a poll showed Tuesday.
In a poll conducted by Yonhap Infomax, the financial news arm of Yonhap News Agency, 16 out of 18 economists surveyed forecast the Bank of Korea (BOK) to again hold its policy rate frozen at its monthly rate-setting meeting scheduled for Friday.
Bank of Korea (Yonhap)
The key rate currently stands at 1.5 percent. The central bank has stood pat on the key rate since June 2015 after sending it to the record low level through four rate reductions in less than a year.
"It seems that growth is picking up mildly in the second quarter, thanks to the extension of fiscal stimulus and the resultant rebound in domestic demand. This should provide a source of comfort for policymakers and reduce the urgency to cut rates," said Ma Tieying, an economist at DBS in Singapore.
Such an outlook follows what government officials, including Finance Minister Yoo Il-ho, have called still weak but clear signs of improvements in Asia's fourth-largest economy.
Korea's consumer prices have risen by more than 1 percent on-year for three consecutive months since February, while the rate of drop in exports slowed from the start of the year.
Some of the economists still noted a need to further reduce the key rate to assist economic growth here, but many insisted now was not the time.
"We expect a slow recovery in the second quarter, but a need to cut the key rate continues to remain high as the economy continues to face many uncertainties at home and abroad," Samsung Securities economist Lee Seul-bi said. "However, considering the BOK's basic stance that monetary policies, such as a rate cut, should be used when their outcome can be maximized, we believe a rate reduction will be more likely in June or July."
Those predicting a rate cut at this month's monetary policy board meeting cited a need to support the government-driven corporate restructuring.
"The BOK will likely seek to synchronize its monetary policy with the government's fiscal policy while supporting the government-led restructuring process," Dongbu Securities analyst Moon Hong-cheol said.
Out of the 18 economists surveyed, nine projected the BOK will send the key rate to a new low of 1.25 percent in June. (Yonhap)
