RTTNews - Bank of Korea Governor Lee Seong-tae and his board on Thursday voted to keep interest rates on hold for a fourth consecutive month, maintaining the record low of 2.00 percent in line with expectations.
Before also holding rates at the March 12, April 9 and May 12 meetings, the bank had trimmed rates by 50 basis points to 2 percent on February 12, marking the sixth rate cut in the previous four months.
The domestic economic downturn has flattened out thanks to the proactive fiscal and monetary policy striving, the bank said in a statement accompanying the decision. The slump in domestic demand has moderated and production activities have improved. The downside risk to economic growth is thought, however, to persist because of the rise in international raw material prices and the economic slowdown in the major advanced economies.
The BoK had pared rates by 25 basis points on October 9 and then slashed them again by 75 basis points in an emergency meeting on October 27. Then on December 11, the bank slashed rates by another 100 basis points in the largest rate cut in the bank's history - since it started adopting a benchmark interest rate in 1999. On January 9, the bank trimmed rates by 50 basis points to 2.50 percent.
Before raising rates in August to combat inflation, the board had left interest rates at 5.00 percent for 11 straight meetings.
Consumer price inflation has been decelerating thanks to the easing of demand-pull pressures owing to the economic downturn coupled with the downwardly stable exchange rate, the bank said. The mild upward trend of real estate prices has continued.
The board members believe that economic conditions are improving and showing some stability, although concerns about credit risk continue to persist.
Looking ahead, the committee will maintain accommodative policy stance for the time being and do what is needed to bring about the continuation of the recent improving pattern of economic and financial movements, the bank said.
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