Showing Signs of Recovery
Bank of Korea Governor Lee Ju-yeol said on May 25 that he would not mechanically respond to an increase in the U.S. interest rate.
“The long-term U.S. interest rate has lowered as expectations for the U.S. government’s expansionary fiscal policy have weakened while the long-term South Korean interest rate has risen based on expectations for economic recovery,” he explained, adding, “Under the circumstances, the latter has exceeded the former since the second half of last year.” He went on to say, “When it comes to fiscal policy determination, the Bank of Korea takes into account a variety of factors, ranging from financial risks to domestic economic conditions like consumer prices, although it considers the possibility of capital outflow following an interest rate hike by the Federal Reserve as well.”
The governor of the central bank also mentioned that it may adjust its national economic growth forecast upward in July as the South Korean economy is showing signs of recovery these days based on investment and export growth. Earlier last month, the Bank of Korea raised its growth forecast for this year from 2.5% to 2.6%.
In the meantime, the Monetary Policy Committee of the Bank of Korea held its regular meeting on May 25 and maintained the base rate at 1.25% for the 11th consecutive month.