Following Fed's Rate Cut
The U.S. Fed has cut rates by half a percentage point and attention is being paid to whether the Bank of Korea will follow suit.
Bank of Korea Governor Lee Ju-yeol remarked on March 4 that he would take the little difference between the two countries’ key rates into account in formulating future monetary policies. According to experts, this remark implies that the central bank of South Korea is likely to cut the key rate next month.
What matters now are when and how much. The current market consensus is that the bank will do so in an extraordinary Monetary Policy Committee meeting before the next regular meeting scheduled for April 9. “An extraordinary meeting is likely to take place in that the next regular meeting is more than a month ahead,” said Hyundai Research Institute.
Still, the governor also mentioned that he would keep monitoring the spread of COVID-19 and its economic repercussions until this month. This means an interest rate cut may occur at the next regular meeting in April. The Bank of Korea may lower the key rate by more than usual, like the Fed did, if it reaches a conclusion that an economic recession attributable to the spread of the virus is likely to be more serious than thought.