By Cynthia Kim and Jihoon Lee
SEOUL (Multibagger) - The Bank of Korea decided to keep its benchmark interest rate at 3.50% for the 12th consecutive meeting, as policymakers aim to address inflationary pressures. The central bank's decision comes amidst growing expectations of a potential rate cut, which would be the first in 15 years.
Recent data showing a slowdown in consumer price growth to an 11-month low of 2.4% has fueled speculation that the BOK may soon lower borrowing costs to support the economy. However, officials are cautious and waiting for more evidence of sustained cooling in prices before making any moves.
Market watchers are closely following Governor Rhee Chang-yong's upcoming press conference for any hints of dissent within the central bank. Dissenting voices often signal future policy shifts, making this event crucial for investors.
Rhee emphasized the need to balance inflation and financial stability, especially as the weakening currency and rising household debt pose challenges. The uncertainty surrounding the exchange rate and housing market dynamics could delay rate cuts, despite calls for immediate action.
According to Oh Suk-tae, an economist at Societe Generale, sluggish economic growth and subdued inflation support the case for a rate cut in the near term. However, concerns about currency fluctuations and housing market trends may prompt a more cautious approach from policymakers.
In conclusion, the Bank of Korea's decision to maintain interest rates reflects the delicate balance between addressing inflation concerns and supporting economic growth. Investors should monitor upcoming developments, including Governor Rhee's press conference, for insights into future policy actions and their potential impact on financial markets.