S Korea’s central bank keeps key policy rate steady amid steady recovery

SINGAPORE (ICIS)–South Korea’s central bank on Thursday kept its benchmark key interest rate unchanged at a record low of 0.5% as the economy has continued to recover at a modest pace despite the recent resurgence of coronavirus cases.

The Bank of Korea’s (BOK) monetary policy board voted to maintain the seven-day repurchase rate at 0.5%, it said in a statement.

“As the recovery in the Korean economy is expected to be modest and inflationary pressures on the demand side are forecast to remain weak, the board will maintain its accommodative monetary policy stance,” the BOK said.

The South Korea economy is expected to contract by around 1% in 2020 before rebounding to a growth of about 3% in 2021, the central bank said.

“Although the recovery in private consumption has been slow and the correction in construction investment has continued, facilities investment has started to recover and the improvement in exports has continued,” it said.

“Going forward, the economy is likely to recover gradually, led mainly by exports and investment,” the BOK added.

South Korea reported 583 new cases on Thursday, the first time that the daily tally has exceeded 500 since 6 March, according to the Korea Disease Control and Prevention Agency (KDCA).

The country’s government t reimposed tough social distancing rules on the capital Seoul and surrounding regions this week after the daily infection numbers began hovering above 300 last week.