BOK Governor Lee Ju-yeol. [Photo by Bank of Korea]
The Bank of Korea (BOK) kept its key rate unchanged despite widening discrepancy with the U.S. tightening pace and downgraded growth estimate for this year amid alarming job woes and shaky export front due to a full-blown trade war between the world’s two largest economies.
The BOK in a monetary policy committee meeting on Thursday held the base rate steady at 1.5 percent for the fifth straight month. For the first time since the last hike in November, the vote was not unanimous.
“There was one vote for a hike, but that should not be interpreted as a signal for a rate increase (in near future),” said BOK Governor Lee Ju-yeol in a press conference after the meeting.
The inaction has been widely expected, given the worsening job and other economic data. Many do not expect the central bank to rush to keep up with the U.S. tightening pace unless there are signs of relief on the job and demand-side inflation front.
On Thursday, the main Kospi gained 0.19 percent to close at 2,285.06. The Korean won finished at 1,125.9 against the U.S dollar, down 5.9 won from the previous session. The benchmark three-year government yield gained 3.6 percentage points to end at 2.090 percent. It was down to the lowest level of this year a day earlier.
Foreign investors have shed Korean stocks and sent the Korean won to lose 3.1 percent in just a month against the U.S. dollar, not because of the rate discrepancies, but due to concerns over the impact on Korean exports from the intensifying trade war between the U.S. and China, Lee said.
Job additions in June kept slightly above 100,000, averaging 142,000 for the first six months, less than half of the government target of 320,000 growth in jobs for this year.
Deputy Prime Minister for economy Kim Dong-yeon presiding a cabinet meeting Thursday to address the worst job conditions since the aftermath of the 2008 financial crisis warned of “serious downside risk” to the export-reliant economy in the latter half due to the escalated trade war.
The BOK revised down its growth outlook for this year from 3.0 percent to 2.9 percent. Inflation estimate was unchanged at 1.6 percent.
By Kim In-oh and Cho Jeehyun
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