The Bank of Korea has decided to keep interest rates unchanged for the fifth consecutive time, in line with market expectations. The benchmark seven-day repurchase rate will remain at 3.50%, as the central bank maintains its cautious approach towards policy tightening. Recent data shows signs of a cooling economy, with inflation dropping to a 25-month low of 2.3% and exports declining for the tenth straight month in July.
Analysts surveyed by The Wall Street Journal had anticipated this decision, with the majority predicting no rate changes until 2023. However, some analysts foresee a potential rate cut later this year or early next year to stimulate growth.
The bank's outlook for the country's gross domestic product (GDP) remains unchanged, with a forecasted expansion of 1.4% in 2023. This follows a 2.6% growth in the previous year. Inflation is also expected to stay consistent, averaging at 3.5% for 2023.
Looking ahead to 2024, the bank has adjusted its GDP growth forecast slightly downward to 2.2% from 2.3%, while maintaining its inflation estimate at 2.4%.
Governor Rhee Chang-yong emphasizes the importance of careful consideration before implementing any policy easing measures. Rate cuts will only be considered when there is certainty that inflation will converge on the bank's target of 2.0% annually.