The Bank of Korea (BOK) on Thursday stayed pat on the benchmark rate and vowed to be prudent in further hikes while turning more buoyant about the economic performance thanks to robust recovery in the global economy.
In its first monetary policy meeting for 2018, the central bank kept the policy rate unchanged at 1.50 percent after pulling it up by a quarter of a percentage point from the record low of 1.25 percent kept unchanged since June 2016 in the last meeting in November, the first raise in more than six years.
It indicated further hikes in line with the tightening in the United States and elsewhere, but said its move will hinge on domestic conditions.
The central bank also agreed with the government in its forecast of a 3.0 percent annualized growth for this year, up from 2.9 percent estimated in October, citing faster-than-expected recovery in the global economy. The economy is estimated to have grown 3.0 percent in 2017.
Inflation for this year has been adjusted down to 1.7 percent from earlier estimate of 1.9 percent as steep appreciation in the Korean won keeps import prices subdued.
The effect on the 16.4-percent hike in minimum wage this year on consumer prices as well as employment and broader economy may have to be watched longer, said BOK Governor Lee Ju-yeol in a press conference.
Menu prices in diners and service charges have slightly gone up as employers began to transfer the spike in labor costs onto bills.
The benchmark three-year government yield fell 5.5 basis points to 2.172 percent and five-year bond down 3.9 basis points to 2.430 percent on Thursday. The Kospi gained 0.02 percent to close at 2,515.81 and the won fell 0.13 percent to 1,070.70 against the U.S. dollar.
By Kim In-oh and Cho Jeehyun
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]