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The Bank of Korea ‘Freezes’ the Base Rate at 3.5%... Korea-US Interest Rate differential 1.75%p, Growth Rate Cut

NSP NEWS AGENCY, By Soon-ki Lee and Soo-in Kang, 2023-06-08 01:35 ENX7
#BOK #Freeze #BaseRate #3.5%

(Seoul=NSP NEWS) = At the last meeting of the Monetary Policy Committee of the BOK in the first half of this year, it decided to freeze the base rate at the current 3.5% level. As a result, the interest rate gap between Korea and the U.S. gap widened to 1.75%p, the largest ever. In addition, BOK forecast the economic growth rate at 1.7%, down from its previous forecast.

On the 25th, the Monetary Policy Committee of the BOK held a monetary policy direction meeting and announced that it had decided to freeze the benchmark interest rate and operate it at the current level of 3.5%. This is the third consecutive freeze since February. This means that the benchmark interest rate will remain at 3.5% until the July meeting.

The U.S. Federal Open Market Committee(FOMC) raised the benchmark interest rate by 25 basis points to 5.0-5.25%, widening Korea-the U.S. interest rate gap to 1.75%p. Nevertheless, the reason why the BOK decided to freeze the benchmark rate seems to be that the won-dollar exchange rate did not rise significantly as it fell to the 1310 ~1320 won range, and the FOMC effectively signaled the end of tightening.


In addition, the BOK revised its economic growth forecast for Korea to 1.4 percent, down 0.2 percentage points from 1.6 percent. Next year, the forecast is 2.3%.

The forecast for consumer price inflation this year is 3.5%. It is the same level as the previous estimate released in February. Next year, the forecast is 2.4%.

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