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The BOK’s Monetary and Finance Committee held a meeting to determine the direction of monetary policy on the 25th and froze the base rate at 0.5% per annum. The KFTC previously decided to maintain the standard interest rate of 0.5% per annum on the 15th of last month.
On March 16 of last year, when the Corona 19 crisis began in earnest, the BOK opened a temporary bank account and lowered the standard interest rate by 0.5 percentage points from 1.25% to 0.75%. Later, in May of that year, the interest rate fell again and the base rate fell to a record low of 0.5%.
Since November last year, concerns about the economic downturn have continued due to the third spread of Corona 19 and the strengthening of social distancing. The controversy over the overheating market for assets, such as real estate and stocks, continues, and it is difficult to lower interest rates further, as the current base rate is close to the effective lower limit.
In particular, it is analyzed that it would not have been easy for the BOK to raise interest rates until it confirmed the recovery of the real economy in a situation in which employment and consumption indicators were lagging.
The Financial Investments Association surveyed 200 employees related to bond holding and management on the 8th and 15th, and 100 respondents, of which 99% predicted that the base rate would freeze this month.
The BOK is analyzed to maintain a relaxed monetary policy due to uncertainties in the real economy, such as the slowdown in consumption and employment, while long-term interest rates for government bonds have gradually increased as expectations of economic recovery join the expansion of the issuance of government bonds.
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| [서울=뉴스핌] Reporter Baek Ji-hyun = Bank of Korea Governor Lee Joo-yeol chairs the meeting at the Financial Monetary Committee plenary meeting held at the Bank of Korea in Jung-gu, Seoul on the morning of the 15th and strikes the gavel .[사진=한국은행]2021.01.15 [email protected] |
The market’s attention is focused on this year’s economic growth rate and whether government bonds should be purchased. In its economic outlook for November last year, the BOK presented a forecast for this year’s gross domestic product (GDP) growth rate of 3.0%. The BOK reissued its growth rate forecast on the same day.
Major foreign organizations predict that the Korean economy will achieve a growth rate of around 3% this year. The International Monetary Fund (IMF) revised its growth rate forecast last month from 2.9% to 3.1%. The Asian Development Bank (ADB) presented its growth rate forecast for December of last year at 3.3%. The government’s forecast for this year’s growth rate is 3.2%.
The market’s attention is also drawn to the type of comments Governor Lee Ju-yeol will make regarding the purchase of government bonds. As the government is expected to issue large-scale deficit Treasuries due to the additional budget plan promoted by the government, the uncertainty of supply and demand in the bond market has increased.
On the other hand, Governor Lee voiced his opposition to the BOK’s direct acquisition of government bonds, which was discussed as a plan to finance compensation for damages to independent workers at the meeting of the Planning and Finance Committee of the National Assembly on the 23rd.
He said: “There is no change in the position that it is not desirable for the BOK to directly take over government bonds issued by the government.” “This is because concerns, which undermine central bank confidence, and external rookies have also had a negative impact.”
