Bank Of Korea Holds Key Rate; Opens Door For Rate Cut

(RTTNews) - The Bank of Korea maintained its key interest rate for the twelfth straight session on Thursday and left the door open for interest rate reduction in the near term.

The Monetary Policy Board unanimously decided to hold the Base Rate at 3.50 percent.

"While maintaining a restrictive monetary policy stance for a sufficient period of time, the Board will examine the timing of a rate cut," the bank said in a statement. "Given the underlying uncertainties regarding the future path of inflation, however, it is necessary to further assess whether inflation will continue its slowing trend, the bank said.

The board expects consumer price inflation to decline moderately to the lower 2 percent range, and it is judged that it could be slightly lower than the May forecast of 2.6 percent for the year.

Core inflation is projected to slow gradually to the 2 percent level, and it is expected to be consistent with the May forecast of 2.2 percent for the year.

At the meeting, two among seven board members said the bank should consider a reduction in the policy rate within the next three months.

Governor Rhee Chang-yong said market expectations for rate cuts intensified.

The unanimous decision to hold the interest rate makes its even clearer that the BoK is in no hurry to cut rates, ING economist Min Joo Kang said. The focus is more on financial market stability from now on, the economist noted.

The economist said an October rate cut is more likely than an August cut. Capital Economics' economist Gareth Leather expects a quarter point rate cut in October.

With economic growth set to slow and food price inflation to ease further, inflation is likely to fall back to the target over the coming months, the economist said.