SEOUL, Nov. 30 (Xinhua) -- South Korea's central bank on Thursday froze its policy rate for the seventh consecutive time this year due to increased worry about economic downturn.
Bank of Korea (BOK) Governor Rhee Chang-yong and other monetary policymakers decided to leave the benchmark seven-day repurchase rate unchanged at 3.50 percent.
It was in line with market expectations. According to the Korea Financial Investment Association's poll of 100 fixed-income experts, 96 percent predicted the rate freeze this month.
The central bank had put the rate on hold in February, April, May, July, August and October after delivering interest rate hikes by 3.0 percentage points between August 2021 and January 2023.
The successive rate freeze came on the back of rising concern about economic slowdown, affected by the still weak global demand for locally-made products and the high borrowing costs that roiled the real estate market.
The country's export marked the first rebound in 13 months in October, but it was mainly attributable to the sharp fall in October last year.
The outbound shipment added 5.1 percent from a year earlier to 55.09 billion U.S. dollars in October.
External uncertainty remained such as geopolitical risks in the Middle East and Europe.
The BOK said in a statement that the domestic economic growth was forecast to maintain its improving trends with an export recovery, while pointing out uncertainties such as the prolongation of restrictive monetary policy stances at home and abroad and a slow pace of consumption recovery.
Higher borrowing costs increased the debt-servicing burden for households struggling with record-high debts that would negatively influence the already faltering property market.
Debts owed by households to deposit-taking banks kept an upward trend for the seventh straight month to reach a new high in October due to the supply of government-backed mortgage loans and the government measures to prop up the real estate market.
Inflationary pressure mounted in the past three months. Consumer prices rose 3.8 percent in October from a year earlier after gaining 3.4 percent in August and 3.7 percent in September.
The consumer price inflation surpassed the BOK's midterm inflation target of 2 percent for 31 months in a row.
After peaking at 6.3 percent in July last year, the headline inflation had been on the decline and hit the bottom at 2.3 percent in July this year.
Inflation expectations, which measure the outlook among consumers over headline inflation for the next 12 months, fell this year from 4.0 percent in February to 3.7 percent in April, 3.5 percent in June and 3.4 percent in November.
The BOK noted that although inflation had been elevated than previously expected, it was projected to continue its underlying trend of a slowdown, adding that there were high uncertainties in household debt growth and external conditions.
Concerns lingered over a broad gap between the South Korean and the U.S. interest rates.
The U.S. Federal Reserve froze its target range for the federal funds rate at 5.25-5.50 percent for the second straight time in early November.
BOK Governor Rhee told a press conference that four out of six monetary policy board members left open a possibility for additional policy rate hikes.
The higher U.S. interest rate put the BOK on alert as the belated response may force foreign funds out of the South Korean financial market and excessively cut the value of the domestic currency versus the greenback.
The local currency's depreciation would increase import costs for raw materials, putting inflationary pressure on the domestic economy. ■
