South Korea's central bank said on the 22nd that it left its policy rate unchanged because it needs to assess the effects of two rate increases in July and August. The Bank of Korea's Monetary Policy Board added that it would decide the timing and pace of any further increases while monitoring inflation, growth and financial stability.
The board made the remarks in a monetary policy statement released after it held the base rate at 3% on the day.
"The domestic economy has continued to grow at a solid pace, led by exports and investment, while inflation has remained elevated at around 3% and risks to financial stability persist," the board said. "Given heightened uncertainties related to the situation in the Middle East and the monetary and fiscal policies of major economies, the board judged it necessary to keep the base rate at the current level while assessing how domestic and external risk factors unfold and what effects the two rate increases have had."
On the economy, the board said exports and investment would continue to grow strongly on the back of a robust semiconductor cycle, and that a recovery in consumption would gradually broaden as income conditions improve. "Accordingly, growth this year and next is expected to exceed the August forecasts — 3.3% and 2.9%, respectively — by a considerable margin," it said.
On prices, the board said inflation would stay above the target level for a considerable period as the pass-through of higher cost pressures continues and demand-side pressures gradually build. "Consumer and core inflation this year will broadly match the August forecasts of 2.7% and 2.5%, respectively, but next year both are expected to exceed the earlier forecasts of 2.3% and 2.5%," it said.
"The board will conduct monetary policy so as to stabilize inflation at the target level over a medium-term horizon while paying attention to financial stability, as it assesses the growth momentum," the board said. "Going forward, the board will determine the timing and pace of any additional rate increases while closely monitoring inflation and growth trends as well as financial stability conditions."
All seven members of the Monetary Policy Board voted in favor of holding the rate.