Berita 24 English - COVID-19 uncertainty and worries about financial imbalances, as well as signs of a broader economic recovery, will help...
Berita 24 English - COVID-19 uncertainty and worries about financial imbalances, as well as signs of a broader economic recovery, will help the central bank keep interest rates low for the rest of 2021.
The BOK will keep its base rate at 0.50 per cent, according to all 26 analysts surveyed by Reuters.
Citi Bank believes BOK will remain cautious given the uncertainty surrounding domestic coronavirus cases and vaccine distribution.
The BOK is almost certain to focus on domestic financial imbalances from the housing market in the coming months.
A significant downturn in exports and higher prices dampened the optimism generated by the recent rising exports and inflation numbers, which suggested the economic recovery was gaining speed.
Trade growth in South Korea reached a peak in over a decade in April, with consumer prices also increasing rapidly.
At the same time, most analysts expect the Federal Reserve to raise interest rates later in the year, in the first half of 2022 at the earliest.
In the long term, 21 analysts predicted that BOK would raise rates at least once during 2022.
Of the ten who saw a rate hike, half believe it will happen in the first half of next year, while the other half predict it will happen in the second half.
"We expect the BOK's priority will remain on growth this year and then broaden into a more comprehensive recovery by 2022 – which will be aided by widespread vaccination coverage," stated ANZ economist Krystal Tan.
The BOK's assumption is for it to raise its policy rate over time, with a 25bp increase over the second quarter of 2022, in particular.
With investors focusing on the bank's revised economic projections, which are expected to be released after the rate decision, the results will favour the bank.
The BOK is currently projecting that the economy will grow by a median of 3.7%, and inflation will rise by a median of 1.7%.
For February's forecasts, the bank forecasted growth of 3.0% and inflation of 1.3%.
