South Korean central bank expected to keep rates unchanged

At its meeting today, South Korea’s central bank will announce that it will maintain the interest rate of 0.75%, a record low for the country.

Though interest rate cuts are typically employed to promote economic growth in times of sluggishness, the Bank of Korea believes that cutting interest rates would do little to address the current economic slowdown due to COVID-19. South Korean chip exports are down as mobile phone and computer factories around the world shutter. Petrochemical products, another major export, also dropped because of reduced demand from China.

Other concerns include a weakening currency and the risk of further stimulus worsening Seoul’s housing price bubble. Officials believe that micro policies and supporting vulnerable industries would be more effective, and the government has announced a $9.8 billion stimulus package to support companies in health industries, childcare, and outdoor markets. As a global economic recession looms in the medium term, it is likely that the Bank of Korea will decide to cut its rates further towards the end of the second quarter to prevent a dramatic financial slowdown.

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