Overall Industry Business Sentiment Index (BSI) Falls 10 Points MoM
Next Monetary Policy Direction Meeting on April 9
[Asia Economy Reporter Jang Sehee] After the Bank of Korea's Monetary Policy Committee kept the base interest rate at the current level of 1.25% per annum, macroeconomic and bond experts assessed that there is a high possibility of a rate cut at the April MPC meeting. They analyzed that expectations for a rate cut remain valid based on the potential deterioration of future macroeconomic indicators.
Lee Miseon, a researcher at Hana Bank Financial Investment Research Institute, said on the 29th, "Even if the base rate is held steady this time, if the domestic growth rate falls significantly, a rate cut will eventually be necessary in April."
She added, "If the rate is held steady again in April, they will need to provide justification, but it seems difficult to find grounds to maintain the current rate."
Kang Seungwon, a researcher at NH Investment & Securities, evaluated, "This rate freeze only means that the timing of the rate cut is postponed to April."
The Bank of Korea also acknowledged the slowdown in growth. At a press conference following the MPC meeting, Governor Lee Ju-yeol emphasized, "The domestic economy has shown a flow similar to initial expectations, but it is facing difficulties due to the unexpected outbreak and spread of the novel coronavirus infection (COVID-19)," adding, "Consumption has contracted, and exports have slowed." Reflecting this, the Bank of Korea lowered its GDP growth forecast for this year to 2.1%.
In fact, the business sentiment of companies has worsened. According to the 'February 2020 Business Survey Index (BSI) and Economic Sentiment Index (ESI)' released by the Bank of Korea on the 26th, the BSI for all industries in February was recorded at 65, down 10 points from the previous month.
An industry official forecasted, "Considering that the Bank of Korea will decide the base interest rate in the future taking into account the increasing damage from export sluggishness and domestic demand contraction due to COVID-19, the likelihood of a rate cut in April is gaining weight."
Meanwhile, the next monetary policy direction meeting is scheduled for April 9.
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