Bank of Korea to maintain wait-and-see mode as it cuts GDP forecast

SEOUL - The Bank of Korea (BOK) has kept its policy interest rate unchanged at 1.50%, in line with expectations, with the bank becoming more vigilant to downside risks pertaining to export and consumption outlook.

The central bank noted that ‘under the influence of the Middle East Respiratory Syndrome (MERS) outbreak, consumption has declined significantly and the sentiments of economic agents have worsened’.
However, the BOK also expected that Korea’s ‘domestic economy will show a trend of recovery going forward, owing chiefly to expansionary macroeconomic policies and subsiding of the shock from the MERS outbreak’.
The central bank lowered its 2015 GDP growth forecast to 2.8% from 3.1%. Its revised growth outlook is in line with ANZ’s new GDP forecast of 2.7% (previously 3.1%) for 2015.
ANZ believes BOK has entered a wait-and-see mode – and that further deterioration of economic conditions could prompt it to cut rates again. “However, the central bank will likely stay put in view of volatility in global markets,” ANZ says. www.live.anz.com (ATI).