Bank of Korea Holds Base Rate Steady...Signs of Semiconductor Recovery, Need for Real Estate Safeguards (Update)

On the 17th, the Monetary Policy Committee Decided to Keep the Rate at 1.25%

Bank of Korea Governor Lee Ju-yeol is striking the gavel at the 'Monetary Policy Direction Financial Monetary Committee' held at the Bank of Korea in Jung-gu, Seoul on the 17th. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporters Sim Nayoung, Kim Eunbyeol] The Bank of Korea decided on the 17th at the first Monetary Policy Committee meeting of the new year to keep the base interest rate at 1.25%. The Bank of Korea lowered the base rate twice last year in July and October due to economic slowdown, and has maintained it at 1.25% since November.

The decision was based on expectations that South Korea's export situation would improve and economic growth would slightly rebound as external uncertainties eased following the Phase One trade agreement between the U.S. and China. With improvements in the semiconductor industry, exports started the period from January 1 to 10 on an upward trend. The export amount from January 1 to 10 (provisional customs clearance basis) was $13.3 billion, a 5.3% increase compared to the same period last year.

There is also analysis that the Bank of Korea will have no choice but to keep the rate steady for the time being to align with President Moon Jae-in's real estate regulation policies. Kim Kyungsoo, Honorary Professor at Sungkyunkwan University, said, "A decrease in interest rates is a decisive factor in rising housing prices, so the Bank of Korea must act as a safeguard and will find it difficult to lower rates. Since the U.S. is also unlikely to lower its base rate this year, the Bank of Korea has placed weight on maintaining the current rate."