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| Bank of Korea Gov. Lee Ju-yeol wearing a mask raps his gavel at a meeting in its Seoul building, Friday. Yonhap |
Korea’s central bank on Friday held its policy rate unchanged at a record low of 0.5 percent, as the fallout from a third wave of the new coronavirus hurt the scope of maintaining an economic recovery.
As widely expected, the monetary policy board of the Bank of Korea (BOK) voted to leave the base rate steady in this year’s first rate-setting meeting.
In November last year, the BOK froze the key rate as economic uncertainty heightened amid a flare-up in new coronavirus cases.
To bolster the pandemic-hit economy, the BOK slashed the key rate to an all-time low of 0.5 percent in May last year after delivering an emergency rate cut of half a percentage point.
Analysts said economic uncertainty has increased as daily new virus cases have recently hovered around 1,000, although health authorities said the third wave appeared to have slowed down.
Despite signs of recovery in exports, weaker consumer spending has weighed on employment and built pressure on policymakers.
For December last year, the monthly exports advanced 12.6 percent on-year to reach US$51.4 billion. It marked the first time since November 2018 for the export volume to surpass the $50 billion mark.
Earlier this week, South Korea reported the largest job loss in December last year since 1999 as the pandemic pummeled the job market.
For the whole of 2020, the country also shed the largest number of jobs in 22 years, when the country was in the midst of the 1997-98 Asian financial crisis.
Driven by signs of a modest recovery in exports, the BOK revised up its 2020 economic growth outlook to a 1.1 percent contraction in November last year, compared with a previous forecast of a 1.3 percent retreat.
The BOK expected the economy to grow 3 percent in 2021, more than a previous forecast of 2.8 percent expansion.
South Korea’s low inflationary pressure and rising housing prices also appeared to prompt the BOK board to stand pat, analysts said.