Monday, March 17th, 2014
SEOUL, KOREA - The Bank of Korea has maintained the benchmark interest rate unchanged at 2.50 percent on March 13. The Monetary Policy Committee of the central bank held a regularly scheduled meeting in the morning of the 13th and decided to keep the current interest rate level. It has been ten months since the bank lowered the rate by 0.25 percentage point in May last year.
Currently factors such as the slow economic recovery pace and the burgeoning household debt level in excess of 1,000 trillion won make it hard to adjust the interest rate. On the external front, there are uncertainties remaining in emerging market finances due to the U.S. monetary authorities' quantitative easing tapering. The ongoing political crisis in Ukraine and the worries over the Chinese economic slowdown are other factors that keep policy makers awake at night.
Market watchers said they had expected the interest freeze in the March meeting. In a survey conducted by the Korea Financial Investment Association to bond traders, 99.2 percent of respondents out of 124 said there would be no change in interest rate this time.
Woori Futures analyst Kim Young-jung said, "Given the positive comments on the Korean economy and its overriding emphasis on financial market stability, we predicted the Bank of Korea would not change the interest rate. In addition, the central bank has never changed interest rate in months when its governor steps down."
The four-year term of Kim Choong-soo, the incumbent governor of the Bank of Korea, will expire on March 31. Since May 1999, the benchmark rate has not been changed in months during which a central bank governor or Monetary Policy Committee member is replaced.
