Economists unanimous in BOK inaction Friday, rate cut likely delayed to 2H

2020.01.13 15:10:06 | 2020.01.13 15:13:19

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Signs of bottoming-out in the Korean economy would likely stall additional monetary action, with economists unanimous in predicting the central bank to stay pat on rates when the Bank of Korea board deliberates its first rate move for 2020 on Friday.

The Maeil Business Newspaper poll on 10 economists found unanimous decision of no change in the benchmark rate from the current 1.25 percent.

The bet on another rate cut in the first half also has eased as signs of improvements on external and domestic demand can buy the central bank more time to save monetary ammunition, with the rate already at a historic low and housing prices gathering bubbles.

The BOK brought down the rate by a quarter of percentage point in July and October last year as the economy performed at its worst in a decade among multiple whammies on the trade front.

The double-digit contraction in exports stopped in December and outbound shipments in the first 10 days in January turned positive.

Inflation which raised alarm by touching sub-zero in August and September also started to gain from the final months of last year.

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“The central bank would not want to provoke growth in housing price with a rate cut just a few weeks after the government launched its strongest yet measures to rein in the speculative housing market,” said Park Tae-geun, an analyst at Samsung Securities.

The U.S. Federal Reserve also indicated to stall additional easing. The impacts from the recent conflict between the United States and Iran have so far been limited, said economists.

Still, some think the BOK should go more aggressive to push the economy out of a slow-motion growth around 2.0 percent.

Gong Dong-rak, an analyst at Daishin Securities, bet on a rate cut in February as “the economy is still performing below its potential.”

Hong Sung-il, head of economic policy research team at Korea Economic Research Institute projected addition cut in the latter half of this year. “The BOK could take another action in the second half if the economy does not recover in the first half.”

By Song Min-geun, Kim Hyung-joo, and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]