25th Monetary Policy Direction Decision Meeting
Interested in adjusting the forecast for the 3.0% growth rate
After lowering the benchmark interest rate to an all-time low of 0.5% in May of last year, the Bank of Korea, which has tied interest rates, is expected to continue its freezing trend. Although concerns over financial imbalances such as rising real estate and stock prices and increased household debt amid ultra-low interest rates have increased, it is difficult to change the monetary policy tone as the real economy is slow to recover.
In the financial market on the 21st, the BOK financial and monetary committee (Monetary Commission) is expected to freeze the standard interest rate to the current 0.5% level at the meeting to determine the direction of monetary policy to be held on the 25th. It is observed that the base rate will be frozen for six consecutive times since last July. In the aftermath of the re-proliferation of Corona 19, domestic demand such as consumption has contracted and employment indicators have slowed.
Kim Yu-mi, a researcher at Kiwoom Securities, said, “Exports are continuing, but employment and consumption indicators are still sluggish due to the aftermath of Corona 19, so the standard interest rate will be frozen.” It will be difficult for the BOK to change its easing monetary policy stance under the circumstances.”
Along with the decision of the standard interest rate, attention is also being drawn to the BOK’s economic diagnosis. Earlier, in November last year, the BOK proposed a growth rate forecast of 3.0% for this year’s gross domestic product (GDP). The BOK re-announces its growth rate forecast on this day. Although economic uncertainty has increased due to the re-proliferation of Corona 19 and measures to strengthen social distancing, there are many prospects that it is not enough to lower the growth rate immediately. Some observers say that the growth rate will be adjusted upward to reflect the 4th disaster subsidy payment and vaccination effect that the government is promoting.
Major overseas organizations predict that the Korean economy will achieve a growth rate of around 3% this year. The International Monetary Fund (IMF) adjusted its Korean growth forecast last month from 2.9% to 3.1%. The Asian Development Bank (ADB) presented its growth rate forecast for December last year at 3.3%. The government’s forecast for this year’s growth rate is 3.2%.
The market’s interest is also focused on whether Governor Lee Ju-yeol will make any remarks regarding the purchase of government bonds. A large-scale issuance of deficit Treasury bonds is expected due to the government’s additional budget (additional budget), which intensifies in the bond market. A researcher at the Daishin Securities Co., Ltd. said, “The burden on supply and demand has increased due to concerns over the additional economy, but there is more room for the BOK to control the rise in interest rates through measures such as simple purchase.”
Reporter Kim Seong-gil
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