SEOUL- South Korea left its key interest rate unchanged Friday, with markets unnerved by political turmoil at home and global uncertainty following the shock result of the US presidential election.
The central Bank of Korea (BOK) held its benchmark rate at its record-low 1.25 percent for the fifth straight month.
In a statement, the bank said it would closely monitor “uncertainties in domestic and external conditions” over the coming months, with a particular eye on any change in monetary policy by the US Federal Reserve.
The bank said it expected the global economy to maintain a modest recovery, but warned of the possible impact of economic policy changes by the new US administration and Britain’s exit from the European Union.
The uncertainty generated by Donald Trump’s unexpected election triumph has coincided with political paralysis in South Korea where a snowballing corruption scandal has left President Park Geun-Hye fighting for her job.
The scandal, centred on a close personal friend of the president, has seen her approval ratings plunge into single digits and weekly mass protests that have seen tens of thousands take to the streets to demand Park’s resignation.
The Bank of Korea made a surprise rate cut back in June, citing the need to support the sluggish economy.
South Korea’s exports, the mainstay of Asia’s fourth largest economy, have struggled to emerge from a prolonged slump, and now there are real worries among major exporters that Trump’s protectionist campaign message will become a reality.
“Looking at the Korean economy, exports have continued their trend of decline while the improvements in domestic demand activities appear to have weakened a bit,” the BOK said.
President Park and Trump spoke by phone on Thursday, with the US president-elect vowing that US commitment to the security of its key Asian ally in the face of North Korean provocations would not waver.
“We are going to be with you 100 percent,” Trump said, according to a statement from South Korea’s presidential Blue House.
Trump caused consternation during his campaign when he threatened to withdraw the 28,500 US troops permanently stationed in South Korea unless Seoul paid more for their upkeep.