South Korea freezes policy rate at record low

South Korea’s central bank left its key interest rate unchanged on Friday at a record low of 1.5 per cent, while voicing concern over snowballing household debt.

South Korea’s central bank on Thursday revised down its 2016 outlook for economic growth to 3.2 percent from 3.3 percent estimated three months earlier.

The Bank of Korea opted to stand pat on the benchmark seven-day repurchase rate for a fourth consecutive month so it could further monitor the effects on the economy of two rate cuts earlier this year and recent government stimulus measures. Overnight, weak United States retail sales and producer prices data raised doubts that the Federal Reserve would delay hiking interest rates until 2016.

The remaining 15 percent projected a rate cut on worries about the economic slump at home and overseas. South Korean currency Won fell 4.9 percent this year so far.

The rate freeze came after a succession of four rate cuts in just over a year since August 2014 sent the policy rate to the lowest-ever level.

The central bank had trimmed rates by 25 basis points in both its March and June meetings. During the past three session, foreign investors turned net sellers on 10-year bond futures.

Pressure, however, still hangs on the bank to ease policy further.

The country’s exports, accounting for almost half of its gross domestic product, have dipped every month since the start of the year, plunging 14.7 percent on-year in August and 8.3 percent in September. On the stock market, the Korea Composite Stock Price Index (KOSPI) was up 1.1 per cent at 2,032.18 points, the highest intraday level since August 6. Market heavyweight Samsung Electronics Co Ltd gained 2 per cent. LG Display Co Ltd was up 4.4 per cent. Foreigners were set to be net buyers, purchasing a net 36.8 billion won($32.45 million)of shares in the main board.

Following a USA decision last month to postpone its rate hike to later in the year, the BOK governor had been urged to make use of the opportunity with an additional rate cut.