Key Rate Left Unchanged at 1.25%
The Bank of Korea lowered its South Korean economic growth forecast for this year from 2.3 percent to 2.1 percent on Feb. 27, saying that the ongoing spread of COVID-19 may lead to a negative Q1 growth.
In addition, the Monetary Policy Committee of the Bank of Korea maintained the key rate at 1.25 percent that day. “The pace of economic growth has slowed down since the outbreak of COVID-19, which is affecting both consumption and exports,” it explained.
“The impact of the virus will be significant and concentrated in the first quarter to the point of resulting in a negative quarterly growth,” said Bank of Korea Governor Lee Ju-yeol, adding, “Still, the ongoing economic contraction is mainly attributable to spreading concerns and this means that target-specific assistance is likely to be more effective than key rate adjustment and we will make a decision on additional monetary easing after looking into the repercussions for a while.” Experts point out that the central bank is likely to lower the key rate in April in view of the impact of the spread of the virus.