A monetary policy direction decision meeting (telecommunications meeting), which determines the base rate, will be held this Thursday by the Bank of Korea’s Monetary Policy Committee (Monetary Policy Committee). As the economic situation is gloomy and the inflation rate is in line with the BOK’s expectations, the market is putting pressure on the possibility that the current standard interest rate (3.5% per annum) will be maintained.
According to the Bank of Korea and others on the 21st, the Bank of Korea’s Monetary Policy Committee will hold a meeting on the 25th to decide on the base rate. Two new MPs, Park Chun-seop and Jang Yong-seong, will attend the meeting to replace Joo Sang-young and Park Ki-young, who resigned last month.
The market expects the Bank of Korea to freeze interest rates this time, following last February and April. This is because the Bank of Korea is pessimistic about the economy and will not make a contrarian choice that puts stress on the economy by raising interest rates. Last month, the Bank of Korea issued a lower-than-expected revision of its growth rate forecast for this year, citing a weaker-than-expected impact of China’s reopening (resumption of economic activity) and the sluggish IT (information and communications) economy. , including semiconductors.
In fact, the real GDP growth rate (0.3%) in the first quarter barely turned positive due to the revival of private consumption, and the current account balance in March recorded a surplus in two months thanks to dividend income.
In addition, the inflation rate is also stabilizing in line with the BOK’s stance of monitoring inflation while preventing interest rate hikes. The rate of consumer price inflation in April (3.7%) entered the 3% range for the first time in 14 months since February last year (3.7%).
The fact that the US Federal Reserve System (Fed) suggested to the Federal Open Market Committee (FOMC) in May that it would hold off on further raising the base rate is also cited as a factor another in the freezing of interest rates. At the time, Fed Chairman Jerome Powell announced that he had decided to raise the policy rate by 0.25% percent to 5-5.25%, and explained in a press conference that “an opinion came out during the meeting that it was close to the final rate. .”
Lim Jae-gyun, a researcher at KB Securities, said, “We expect that the Bank of Korea will unanimously decide to freeze at the Monetary Policy Committee in May, following last month.
“We believe that the Fed’s interest rate hike is over given that most US inflation indicators are below the base rate,” he said. “Since it is below the quarter, it is unlikely that the Bank of Korea will raise it further,” he said.
However, the difference in the interest rate between Korea and the United States, which records the highest level (1.75%) in history, and the earned exchange rate, which shows upward trend, weighing on the decision to freeze. The BOK is in a position that it will not try to mechanically reduce the interest rate gap between Korea and the United States. President Lee Chang-yong said at a press conference last month, “I don’t think there is a need to respond through interest rates.”
With the prediction that the base rate will be frozen for the third time in a row and the possibility that the period of rate hikes is almost over, the attention of the market is focused on the timing of interest rate cuts. There are predictions that the base rate will be lowered from August, three months later, but the general prediction is that it will be difficult for the BOK to cut the base rate in a hurry, given the still high price level and the public utility rate risk. inflation.
Governor Lee emphasized last month, “Market expectations (for interest rate cuts) are excessive.” .
Ahn Ye-ha, a researcher at Kiwoom Securities, said, “Given the still high inflation level, the Bank of Korea will still insist on the need for continued austerity.” We will maintain a hawkish stance, such as mentioning that there is .”
[ 경기신문 = 고현솔 기자 ]
