BOK holds benchmark interest rate at 1.25% despite virus fears

한국은행 기준금리 1.25% 동결...올해 경제성장률 전망치 하향조정

In today's meeting, South Korea's central bank decided to keep its key rate at one-and-a-quarter percent despite the effects of the coronavirus on the economy.
But because of the outbreak, it's cut its economic growth forecast for this year.
Our Eum Ji-young has the details.
The Bank of Korea on Thursday kept its benchmark rate at one-point-25 percent for February.
It has kept its key rate frozen since October last year when it lowered the rate by 25 basis points to support the domestic economy. The rate is currently at an all-time low.
The central bank was widely expected to cut its benchmark interest rate on Thursday in a bid to offset the economic impact caused by the coronavirus outbreak.
But despite the worsening business sentiment, the BOK decided to freeze the interest rate as lower rates have risks of their own.
Bank of Korea Governor Lee Ju-yeol said at a press briefing on Thursday that the bank decided to hold the rate steady as the contraction of local demand and production is largely due to uncertainties over the COVID-19 outbreak rather than economic factors.
The decision is also a reflection of the worries over the country's growing household debt levels.
Also announced on Thursday, the central bank forecast the local economy to grow by 2-point-1 percent this year,... down 0-point-2 percentage points from what it had forecast last November.
The downgrade reflects contracted business activities both at home and abroad due to the coronavirus outbreak.
The central bank's monetary policy board noted in a statement that the country's economic growth rate has slowed down.
It said, due to the spread of COVID-19, consumption has contracted and exports have slowed.
During the press briefing, Lee said that there is a possibility that the South Korean economy could contract in the first quarter of this year due to the economic hit from the outbreak.
He added that the Bank of Korea's forecasts assume that the outbreak will peak in March and then settle down.
But the central bank kept its economic growth forecast for 2021 at 2-point-4 percent.
Eum Ji-young Arirang News.

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