South Korean central bank seen holding benchmark rate

SEOUL: South Korea’s central bank is expected to keep its benchmark interest rate unchanged tomorrow, as policymakers weigh risks stemming from tensions surrounding North Korea and the possible renegotiation of Seoul’s trade pact with Washington.

All 20 economists polled by Reuters said they expect the Bank of Korea (BoK) to keep its policy rate at a record-low 1.25%, where it has been since June 2016.

The economists are unanimous in expecting the BoK will hold its interest rate for the rest of this year, while a small majority of 12 see a hike to 1.50% during the first half of 2018.

“Although domestic economy is showing stable improvement, tightening policy rates in the face of growing downside risks from the review of the Korea-US free trade agreement would only create uncertainties for the financial market,” said Kim Ji-na, an economist at IBK Securities in Seoul.

In September, South Korea’s exports had double-digit annual growth for the ninth straight month – the longest such streak since December 2011 – thanks to higher memory chip and steel product sales.

Trade Minister Paik Un-gyu said shipment growth could slow in the fourth quarter partly due to “worsening global commercial relations”, though he did not elaborate.

Early this month, South Korea indicated it was open to talks on revising its 2012 trade pact with the US, after initial hiccups that followed President Donald Trump’s threat to terminate the accord unless it was renegotiated. – Reuters