Bank Of Korea retains key rate as expected

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Bank of Korea maintained its key interest rate on Tuesday but signaled a rate hike as early as in November to rein in high inflation and household debt.

The Monetary Policy Board of the Bank of Korea decided to leave its base rate unchanged at 0.75 per cent. The bank had raised its rate by a quarter-point in August.

Governor Lee Ju-yeol said the bank can consider hiking the rate at the next meeting should the economic recovery proceed as expected.

The board said it will appropriately adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its sound growth and inflation to run above 2 per cent for some time, despite ongoing uncertainties over the virus, the bank said in a statement.

The bank expects consumer price inflation to run at the mid-2 per cent level for some time, exceeding the path projected in August, before declining somewhat. Core inflation is forecast to increase to around the upper-1 per cent level.

Going forward, the economy is likely to continue its recovery driven by private consumption. The economy is forecast to grow this year at a pace around 4 per cent, unchanged from the prior outlook.

Further, policymakers observed that the increase in household loans remains at a high level, and housing prices have continued to increase rapidly in all parts of the country.

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