By Jihoon Lee and Joyce Lee
SEOUL (Reuters) – South Korea’s central bank on Thursday held interest rates steady for a fifth straight meeting, as policymakers turn their attention to fine-tuning monetary settings amid softer inflation and slowing growth.
The Bank of Korea (BOK) said its seven-member monetary policy board voted to keep the base rate unchanged at 3.50%, as it did on four previous meetings this year, and in line with all 43 economists surveyed by Reuters.
The BOK kept its economic growth expectation for this year at 1.4%, unchanged from its May forecast, but cut next year’s to 2.2% from 2.3%. Inflation forecasts were unchanged, it said in a statement accompanying the rate decision.
“In the economic outlook… uncertainties regarding future growth in the Chinese economy and its domestic impacts, economic growth in major advanced countries, and the timing of a rebound in the IT industry are judged to be high,” the BOK said.
The central bank added “household debt growth” to a list of factors to monitor, which it said has expanded mainly due to housing-related loans.
The BOK has kept monetary policy unchanged since its last interest rate hike in January and most economists believe the central bank is done with its tightening campaign, which saw 300 basis points worth of hikes between August 2021 and January 2023.
South Korea’s annual consumer inflation has eased since peaking at a 24-year high of 6.3% in July 2022. The rate stood at 2.3% in July this year, still slightly higher than the central bank’s medium-term target of 2% and expected to rebound to the 3% range in the next couple of months.
Thursday’s policy decision comes as investors worry about a slowdown in Asia fourth-biggest economy, which is heavily reliant on trade, with consumer sentiment weakening in August for the first time in six months.
Softening global demand led by China’s sputtering economy, South Korea’s biggest export market, and a delayed recovery of the semiconductor industry have undercut some of the benefits from easing prices.
Policymakers are also concerned about rising household debt which grew at its fastest pace in 1-1/2 years in the second quarter on rising mortgage demand.
Governor Rhee Chang-yong is due to hold a news conference around 11.10 a.m. (0210 GMT).
(Reporting by Jihoon Lee and Joyce Lee; Editing by Christopher Cushing and Shri Navaratnam)