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The Bank of Korea (BoK) is likely to keep its monetary conditions unchanged in 2021, noted Economist at UOB Group Ho Woei Chen, CFA.

Key Quotes

“The Bank of Korea (BOK) continued to keep its benchmark base rate unchanged at record low of 0.50% in April, in line with consensus and our expectation. Last year, the base rate was slashed by 75 bps between March-May as the central bank eased monetary policy to buffer the economy from the impact of the pandemic. BOK governor Lee Ju-yeol said that the rate decision today was unanimous and reiterated that the central bank will maintain its accommodative monetary policy until the economic recovery is stable.”

“BOK’s assessment of the economy has turned more positive but said it is not clear if the recovery has stabilised given the coronavirus development. The BOK said both the economic growth and inflation will be above its February projection and will be providing updated forecasts in May.”

“Despite the positive signs, the coronavirus situation in South Korea remains precarious as risk emerges of a fresh wave of outbreak while the vaccination program has seen setbacks owing to concerns about the side effects. This is likely to delay private consumption recovery even as external demand continues to rebound. Monetary policy focus is likely to remain on the economic recovery and as such we maintain our call for the BOK to stand pat for the rest of the year.”