SEOUL: South Korea’s central bank on Friday left its key interest rate unchanged at a record-low 1.5 percent, as it keeps an eye on the timing of a much-anticipated US interest rate hike.
The decision by the Bank of Korea (BOK) was unanimous and widely expected, following a cut of 0.25 basis points in June.
The central bank is expected to stand pat on interest rates while it assesses the impact of its recent cuts and the US Federal Reserve plans timetable to its first rate rise in almost a decade.
Fed policy makers will meet on Wednesday and Thursday next week but it is uncertain whether they will announce a rise following a wave of global market turmoil caused by fears over China’s economy.
“The current interest rate is supportive of South Korea’s economic activities,” BOK governor Lee Ju-Yeol told reporters.
“Korea’s exports remain sluggish but domestic economic indicators including consumption are showing improvement,” Lee said.
The BOK has instituted four cuts in the past 12 months, totaling a full percentage point.
But Asia’s fourth-largest economy has shown little sign of improvement, with growth in the second quarter slowing to just 0.3 percent—partly due to an outbreak of the MERS virus that stifled consumer spending.
In August, exports tumbled by their most in six years—their eighth consecutive month of falls—hit by weak global demand and falling prices.
In July, the bank cut its 2015 economic growth forecast for the third time this year, to 2.8 percent, citing sluggish exports and weak domestic consumption.
“I don’t think Korea’s economy will slow to near 2.0 percent,” Lee said.