■25th Financial Services Commission Meeting
‘Current 0.5%’ is expected to be maintained for 9 months
Growth rate of 0.2~0.3%P seems to increase slightly
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It is clear that the Bank of Korea will hold the Financial Monetary Committee on the 25th to determine the base rate, and will freeze the current 0.50%, the record low, for 9 months. As the BOK’s benchmark interest rate freeze is influential, the interest of the financial sector and companies is focusing on whether the BOK will raise its growth rate forecast this year.
According to the financial investment industry on the 21st, market experts predict that the BOK will unanimously freeze the base rate to 0.50% at a meeting of the Bank of Korea to determine the direction of monetary policy on the 25th. It is analyzed that the possibility of the Financial Services Commission raising the standard interest rate is slim as concerns over the economic downturn continue due to the third spread of the new coronavirus infection (Corona 19) and strengthening social distancing since last November.
In addition, the controversy over the overheating of the asset market such as real estate and stocks is ongoing, and the current base rate is close to the effective lower limit, which is fueled by the observation that there is little room for an additional rate cut. On May 28, last year, the BOK cut its base rate to a record low of 0.50%, and then decided to freeze the interest rate at both the four monetary policy meetings last year and the Financial Services Commission in January. If the BOK decides to freeze the interest rate again, the standard rate of 0.50% will continue for over nine months.
As the BOK’s benchmark interest rate freeze is confirmed, the market’s interest has already shifted to this year’s revised economic outlook and economic diagnosis, which will be presented immediately after the FSC meeting. There is a possibility that the BOK will slightly increase its growth rate forecast this year from 3.0% to 3.2~3.3%, reflecting the recent strong exports and the government’s large-scale supplementary budget plan. The International Monetary Fund (IMF) raised its growth rate forecast last month from 2.9% to 3.1%, and the Asian Development Bank (ADB) presented its growth rate forecast for December last year at 3.3%.
It is also noteworthy what the BOK governor Lee Ju-yeol will make regarding the purchase of government bonds. As the government promoted a large-scale supplementary system, an additional KRW 10 trillion in deficit government bonds could be issued this year, raising uncertainty in supply and demand in the bond market. A researcher at Daeshin Securities Co-Rak analyzed that “the additional economic situation has made the market burden on the supply and demand of government bonds larger, and there is more room for the BOK to control the rise in interest rates through measures such as simple purchases.”
/ Reporter Son Chul [email protected]
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