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WED, 2014-11-26  KST

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Korea's central bank holds key rate at 2.5% in July
Updated: 2014-07-10 10:02:08 KST

Korea's central bank has left its key rate UNCHANGED at two-and-a-half percent for the fourteenth straight month in July, despite market expectations for a rate cut following the nomination of a pro-growth finance minister.
And for more, we connect live to our Hwang Ji-hye standing by at the Bank of Korea.
Ji-hye, the bank also cut its growth outlook for this year. Tell us about that.

Yes.
The central bank cut its growth outlook by zero.2 percentage points to 3.8 percent for this year and also zero.2 percentage points to 4 percent for next year.
The revision is largely due to the negative impact the ferry tragedy in April had on the nation's already sluggish domestic demand.
But experts say the trimming of its growth forecast doesn't indicate a radical change in the central bank's view that the overall domestic economy remains on a moderate pace of recovery.
They add that even though the growth outlook is lowered, it means the current economic fundamentals still support a mid-3 percent-range growth this year.
Service sector production and retail sales also picked up last month after declining in April -- in a sign that the economy might be pulling out of a private spending slump caused by the ferry disaster.
The top central banker Lee Ju-yeol said after a rate-setting session last month that it was keeping a close eye on whether the disaster would have a long-term impact.

Then, that isn't the new growth outlook, in a way, brushing aside expectations for a growth-supporting rate cut, at least in the near future?

Right.
And as you mentioned earlier, the bank actually kept its key rate steady at 2-and-a-half percent for this month, following its monthly monetary policy meeting today.
This comes after finance minister nominee Choi Kyoung-hwan urged the Bank of Korea to seek easier monetary policies to spur growth.
The yield for benchmark three-year government bonds also hit a new annual low recently, reflecting market expectations for a downward interest rate adjustment.
So it seems like the central bank is signaling the market that it will NOT be swayed by government calls to cut the rate.
This was Hwang Ji-hye reporting live from the nation's central bank.

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