BOK doesn’t budge on key rate

“The Board forecasts that the domestic economy will continue its recovery going forward, centering around domestic demand activities, but in view of external economic conditions judges the uncertainties surrounding the growth path to be high”, it said.

“Despite these projections, the central bank kept its key rate untouched at an all-time-low of one-and-a-half percent, … as it gauges the impact of a small pick-up in domestic consumption in contrast with the continued slide in the country’s exports”.

Later Thursday, the central bank cut its 2015 GDP growth estimate to 2.7% from 2.8%.

Support was also provided to the local currency after series of downbeat economic data from U.S, bolstered expectation for delay in interest rate hike for this year and sparked demand for emerging currencies.

Although it is hard to predict when, the fact that the U.S. Federal Reserve will begin raising the interest rates is another obstacle to the BOK’s additional rate cuts.

The decision by the Bank of Korea was widely expected, following a cut of 25 basis points in June. It has stayed at the record low of 1.5 percent for the fourth consecutive month.

“We will closely monitor factors at home and overseas including…the growth of household debt and the monetary policy of the US Fed”, it said. Households’ outstanding debt owed to financial banks and secondary financial firms reached 773.1 trillion won.

In the July-September period, the daily average of won-yuan trading came to $2.19 billion, down 29.1 percent from $3.09 billion three months earlier.

The focus on engineering a weaker KRW bias will resume, especially if October exports disappoint and if the BoJ eases further.

“Though (we) estimated that the second-quarter growth would be set at 0.4 percent in July, the real growth stood at 0.3 percent”, he told reporters.

The BOK forecast inflation at only 0.7 percent this year thanks to a decline in global oil prices.

The central bank also revised down its growth outlook for next year to 3.2 percent from 3.3 percent.