Bank Of Korea Holds Interest Rates, Reduces Forecast For Economic Growth

South Korea's central bank held interest rates steady at its third meeting on Thursday, as expected, after a one-and-a-half-year tightening cycle, while slightly downgrading its economic growth forecast for this year.

The Bank of Korea announced that its seven-member monetary policy board voted to maintain its policy rate at 3.50 percent, without providing further details. Governor Rhee Chang-yong will hold a press conference shortly.

The decision was predicted by all 40 economists polled. The majority of respondents believe the next rate change will be a reduction, most likely in the fourth quarter of this year.

It said in a statement that inflation would slow rapidly for a while but could still rise towards the end of the year, but it gave no indication whether it agrees with the market that the tightening cycle is over.

"Regarding the need to raise the Base Rate further, the Board will make a judgement while thoroughly assessing the pace of the slowdown in inflation, the economic downside risks and financial stability risks, the effects of Base Rate raises, and monetary policy changes in major countries," it said.

The Bank of Korea began raising interest rates to combat inflation in August 2021, well ahead of the rest of the world's major central banks, and has raised them by a total of 300 basis points since January.

The Bank of Korea has reduced its economic growth forecast for this year to 1.4 percent, down from 1.6 percent in February, while keeping inflation at 3.5 percent.

Rhee had previously stated that the central bank's growth forecast would most likely be reduced.

The fourth-largest economy in Asia has slowed due to sluggish exports and narrowly avoided recession in the first quarter. Inflation has slowed since peaking in July of last year, but it remains well above the central bank's 2% target.