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BOK tipped to freeze key rate at record low next week: poll

SEOUL, Feb. 20 (Yonhap) — The Bank of Korea (BOK) is expected to freeze its policy rate at a record low of 0.5 percent next week, as a third wave of coronavirus infections hammered consumption and job markets, a poll showed Saturday.

In a survey by Yonhap Infomax, the financial news arm of Yonhap News Agency, all 15 analysts polled predicted the BOK will freeze the base rate at its rate-setting meeting next Thursday.

They also forecast the BOK to stand pat on the rate during the remainder of this year.

To boost the pandemic-hit economy, the BOK cut the key rate to the all-time low in May last year after delivering an emergency rate cut of half a percentage point in March last year.

Experts said the rate freeze is anticipated next week, as economic uncertainty lingers amid a fresh surge of virus cases, while booms in asset markets, including the housing and stock markets, have warranted close watch.

“It would be difficult for the BOK to change its monetary policy at a time when the recovery of the real economy is delayed,” Kyobo Securities analyst Baek Yoon-min said.

South Korea’s economy contracted 1 percent last year, marking the worst performance in over two decades, but it appears to have returned to a growth track on the back of a mild recovery in exports.

It is slightly better than the BOK’s projection of a 1.1 percent contraction for last year.

Buoyed by ample liquidity and cheap loans to fight the pandemic, South Korea’s benchmark stock index jumped about 30 percent last year.

Last month, BOK Gov. Lee Ju-yeol warned that the central bank was watching risks of financial imbalances, saying the speed of a stock rally was too quick.

However, it is too early to talk about the BOK’s normalization of its monetary policy, Lee told reporters.

The number of employed people reached 25.8 million last month, 982,000 fewer than a year earlier, according to the data compiled by Statistics Korea. It marked the sharpest on-year fall since December 1998, when the country lost 1.28 million jobs in the wake of the Asian financial crisis.

The country has reported job losses every month since March last year, when the nation lost about 195,000 jobs, the first on-year job loss since 2009. For all of 2020, the nation shed the largest number of jobs since 1998.

Heo Jeong-in, a researcher at KTB Investment & Securities, said the BOK is unlikely to raise the key rate, given the weaker job market and lower inflationary pressure.
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