South Korea’s central bank has chosen to maintain its policy rate for the fourth consecutive time, signaling a focus on combating weakening growth rather than inflation. The Bank of Korea made the expected decision to keep the benchmark seven-day repurchase rate unchanged at 3.50%.
Economists surveyed by The Wall Street Journal unanimously predicted that there would be no change in interest rates in July. However, a smaller group of analysts indicated that they foresee a potential rate cut by the end of 2023 to stimulate growth.
After implementing a series of rate increases, which concluded in January, the Bank of Korea has held the rate steady since February. Recently, there has been growing speculation that the central bank is preparing to pivot its policies to prioritize supporting economic growth. However, officials from the Bank of Korea have repeatedly emphasized the importance of careful consideration before lowering rates.
The South Korean economy is currently experiencing a slowdown, as evidenced by inflation dropping to a 21-month low of 2.7% in June. Additionally, exports, a vital component of the country’s economic growth, have declined for nine consecutive months.
Both the Bank of Korea and the government now anticipate the country’s gross domestic product to grow at a rate of 1.4% in 2023, slightly slower than their previous projection of 1.6%.