SEOUL- South Korea’s central bank held interest rates at a 15-year high on Thursday and struck a balanced policy tone while reiterating risks around inflationary pressures in the wake of stronger-than-expected economic growth.
Governor Rhee Chang-yong said for now the Bank of Korea will continue to keep policy restrictive at the current 3.50 percent benchmark rate amid sticky inflation and the surprise first-quarter growth performance.
“There are expectations for interest rate cuts in the second half, but uncertainties over the timing of it is now even greater,” Rhee told a press conference soon after the BOK unanimously held its key rate steady, as expected by all 43 analysts polled by Reuters.
“It’s not like growth is excessively hot so it is desirable to normalize restrictive interest rates should inflation stabilizes to the target level which we are hoping for.”
The BOK also raised growth forecast for this year to 2.5 percent from 2.1 percent after Asia’s fourth biggest economy grew at its quickest pace in two years in the first quarter.
The bank kept its February inflation outlook for this year at 2.6 percent , as the impact from stronger growth “was not seen big enough to alter” the forecast, Rhee said.
