The Bank of Korea reiterated that economic conditions and grounds are building up towards a lift-off in the benchmark interest rate kept unchanged at the record-low of 1.25 percent since June last year.
“Conditions are building up to allow the central bank to moderate its monetary policy that has been kept loose and accommodative of the economy against low growth rate and inflation,” the BOK said Thursday in its report to the National Assembly.
After last month’s monetary policy meeting, the bank sent the strongest-yet message to the market by disclosing dissent vote on keeping the policy rate unchanged. It further raised market expectations for delivering its first rate hike in more than six years in its Nov. 30 meeting, its last rate-deciding meeting for this year, by raising this year’s growth estimate to 3.0 percent. Recent disclosure of the monetary policy meeting records showed three members on the policy-setting board expressed opinions favorable for a rate hike.
The yield on three-year government bond gained 21 basis points to 2.148 Thursday from a month ago. The last time the BOK made a hike move was in June 2011.
Although the economy is on a recovery path, demand-led inflationary pressure is contained, it said. “We plan to maintain monetary accommodative of the economy and closely watch growth and price developments for future actions,” it added.
By Kim In-oh and Cho Jeehyun
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