{"id":2200354,"date":"2023-03-10T08:00:26","date_gmt":"2023-03-09T23:00:26","guid":{"rendered":"https:\/\/koreapro.org\/?p=2200354"},"modified":"2023-07-05T16:03:53","modified_gmt":"2023-07-05T07:03:53","slug":"bank-of-korea-to-keep-restrictive-policy-for-considerable-period-of-time","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/03\/bank-of-korea-to-keep-restrictive-policy-for-considerable-period-of-time\/","title":{"rendered":"Bank of Korea to keep restrictive policy for \u201cconsiderable period of time\u201d"},"content":{"rendered":"
In a <\/span>policy brief<\/span><\/a> to lawmakers, South Korea\u2019s central bank expressed concerns Thursday that uncertainty remains high over how fast inflation is easing. The Bank of Korea (BOK) said it expects domestic economic growth to decelerate, but it expects inflation to stay above the target level. As a result, it will maintain its restrictive monetary policy stance \u201cfor a considerable period of time\u201d and determine whether to push for additional rate hikes down the road while prioritizing price stability.<\/span><\/p>\n The BOK left its policy interest rate unchanged at 3.5% last month. It was the first freeze after seven consecutive months of rate increases amid growing concerns over an economic slowdown. Inflation has shown signs of easing recently, with consumer prices rising 4.8% last month from a year earlier. But domestic consumer price inflation has slowed more slowly than in major advanced economies due to increases in utility bills, such as electricity and gas prices.<\/span><\/p>\n Why It Matters<\/b><\/p>\n Citing data earlier this year showing that <\/span>inflation has reversed the deceleration<\/span><\/a> it showed in late 2022, U.S. Federal Reserve Chairman Jerome Powell on Tuesday <\/span>warned<\/span><\/a> of tighter monetary policy ahead to slow a growing economy.<\/span><\/p>\n South Korean analysts believe Powell\u2019s remarks mean the Fed could raise interest rates further by 0.5 percentage points. U.S. interest rates are currently at 4.75%. The 1.25 percentage point gap between the Fed and the BOK is the largest in 22 years. If the Fed raises rates, the gap will widen to 1.75 percentage points, exceeding the previous 1.50 percentage point record gap from Oct. 2000. Analysts in South Korea fear the gap could reach 2.00 percentage points by May. As interest rates widen between the Fed and the BOK, it will likely result in significant capital flights from South Korea.<\/span><\/p>\n Although inflation remains a concern \u2014 BOK Governor Rhee Chang-yong said that the central bank\u2019s rate freeze was not a change in its policy \u2014 analysts suspect the BOK is also concerned about slowing growth due to sluggish exports and private spending.<\/span><\/p>\n