×

Bank of Korea holds rates in March in line with expectations

Getty Images

South Korea's central bank kept interest rates unchanged for a ninth straight month on Thursday, on par with market expectations, opting instead to monitor the global economy and monetary policy meetings in advanced economies.

The Bank of Korea's monetary policy committee held its base rate at record-low 1.5 percent, a media official said without elaborating.

Twenty-two of 33 analysts polled by Reuters before the decision forecast the central bank would hold rates on Thursday while the remainder projected a cut. However, 13 of those who saw a hold forecast the bank would cut rates in April or later this year.

"I expect the base rate to be kept unchanged. Economic and consumer sentiment indices fell early this year, but recently, we are seeing a rise in oil prices, which means the macro environment has changed," said Lee Jae-hyung, an economist at Yuanta Securities Korea.

"Unless the economic flow withers too much, I don't think there is much reason to lower the base rate."

March futures on three-year treasury bonds fell after the decision and were trading down 0.03 points at 110.18 as of 0102 GMT.

The Bank of Korea has been facing mounting pressure to lower borrowing costs in the past few weeks as indicators have shown little evidence of Asia's fourth-largest economy rebounding.

Most analysts saw a rate cut taking place in either March or April as four of the central bank's monetary policy committee members are set to leave late-April as their terms end and newly selected members will be cautious to move rates as soon as they take office.

The central bank will also revise in April its economic forecasts for this year and 2017, which are expected to be downgraded. The BOK's growth projection for this year currently stands at 3.0 percent.

Cratering exports have weighed on the economy as shipments fell for a 14th straight month in February in the country's longest falling streak. The trade ministry said last month that underlying reasons for the falling export trend will not dissipate anytime soon.

January factory output declined at the fastest pace in a year as production of key export products fell. Government data out on Wednesday showed that production overall in South Korea has weakened.