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Bank of Korea keeps interest rate steady at 1.5%

The Bank of Korea hand its key interest rate unchanged on Tuesday, as expected, taking note of
voiceless inflationary pressure and showing caution ahead of any further monetary tightening from the U.S Federal Self-restraint’s policy meeting on March 20-21.

The Monetary Policy Board voted on Tuesday to take care the seven-day repurchase rate at 1.50 percent in the last rate decree before Governor Lee Ju-yeol’s term ends in March.

In a conference held on Tuesday, Lee alleged: “”We kept the base rate unchanged today as there is a call for to closely examine growing protectionist measures and uncertainties abroad, although the close by economy is expected to keep firm growth on the back of improvements in the worldwide economy.”

“Demand-side inflationary pressures are expected to remain low as well, granting to our decision today.”

All 14 economists surveyed by Reuters predicted the chief bank would keep its benchmark interest rate unchanged while assessing the purposes of its November rate rise and global

economic conditions.

Eight of the 14 economists measured expected the BOK to lift rates in May, with the others seeing a rise newer.

Markets were little changed after the widely expected settling.

The won was up 0.3 percent against the dollar as of 0053 GMT, while March followings on three-year treasury bonds barely changed at 107.73.

While South Korea’s succinctness started the year on a high note with exports enjoying blast global demand, policymakers are struggling to reduce trade friction with the Amalgamated States stoked by President Donald Trump’s ‘America First’ behaviour.

The U.S. Commerce Department has recommended President Donald Trump impose douse curbs on steel imports, including those from South Korea, after attacking bigger taxes on washers and solar panels in January. There is also the jeopardy a strong won would hurt the country’s export competitiveness.

Such uncertainties underscore the stimulation facing the BOK’s new governor who should be nominated by President Moon Jae-in already Lee’s term ends on March 31.

The new governor may soon be faced with take exception to of raising interest rates without undermining growth or weakening consumption by households already saddled with documentation debt.

“Given all eyes are with the Fed, and as worries about exports are developing, the rate decision probably was an uneventful process. It is also Governor Lee’s concluding,” said Yoon Yeo-sam, a fixed income analyst at Meritz Assurances.

Yoon expects the BOK to raise interest rates in the second half of this year as the domain’s financial markets will remain calm even if the Fed raises percentage rates.

“Unless the policy rate differential between South Korea and the U.S. is as wide of the mark as 100 basis points, it will be OK and we won’t see major capital outflows,” Yoon implied.

In November, the central bank raised the base rate by 25 constituent points, its first tightening in six years. It sees the economy as likely to open out 3.0 percent this year, slowing slightly from aftermost year’s 3.1 percent.

The South Korean economy unexpectedly desiccated in the fourth quarter as struggling car exporters and industrial production failed to keep up the above-named quarter’s dashing pace, posting its worst performance since 2008.

Inflation quietened to 1 percent in January, the slowest in 17 months, decelerating from December’s 1.5 percent and undershooting the 1.3 percent seen in a Reuters interview of economists.

Such indicators have reinforced a broad consensus that the median bank’s monetary tightening will be gradual this year as export and investment-led wen moderates after rapid expansion in 2017.

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