By Kwanwoo Jun
South Korea's central bank kept its policy rate unchanged for an eighth consecutive time, as widely forecast, even as expectations for a rate cut this year grow.
The Bank of Korea held its benchmark seven-day repurchase rate steady at 3.50% at the year's first policy meeting on Thursday.
The decision was unanimous and the bank will keep its restrictive policy "for a sufficiently long period," BOK Gov. Rhee Chang-yong said in a press conference.
"It will be difficult to cut rates for at least six months, in my opinion," Rhee said.
The bank has stood pat since its quarter-percentage point increase in January 2023.
All 19 economists surveyed by The Wall Street Journal earlier had forecast no rate changes in the first quarter. Some have penciled in rate cuts as early as the second quarter of 2024, in response to cooling inflation and to support an economic recovery, but a majority expect rate cuts to only begin in the third quarter.
South Korea's headline monthly inflation averaged 3.6% in 2023, down from 5.1% in 2022. The bank expects inflation to ease further and average 2.6% this year, above its 2.0% target.
The bank expects the country's economy to grow 2.1% in 2024, following an estimated 1.4% expansion in 2023.
Inflation in December eased for a second consecutive month while exports--a main growth engine for the country--expanded for a third straight month.
ING economists Robert Carnell and Min Joo Kang said that the BOK's "hawkish hold" may be warranted by inflation still remaining above 3% and economic growth holding up relatively well despite higher borrowing costs in the country.
"And lastly, the BOK is probably concerned about a fast pace of private debt growth," the ING economists said in a research note.
Write to Kwanwoo Jun at kwanwoo.jun@wsj.com
(END) Dow Jones Newswires
01-10-24 2318ET
