WORLD S. Korea freezes interest rate on worry about US protectionist move

WORLD

S. Korea freezes interest rate on worry about US protectionist move

Xinhua

10:50, July 12, 2018

South Korea's central bank on Thursday froze its benchmark interest rate at a near-record-low level on rising worry about the US protectionist moves that would shrink global trade.

Bank of Korea (BOK) Governor Lee Ju-yeol and six-other monetary policy board member kept the benchmark seven-day repurchase rate on hold at 1.5 percent.

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(File photo)

It was in line with market expectations. According to a Korea Financial Investment Association (KFIA) survey of 100 fixed-income experts, 89 percent predicted the rate freeze.

The BOK refrained from altering its target rate since the bank lifted it to the current level from a record low of 1.25 percent in November last year.

The US Federal Reserve raised its benchmark rate in June to a range of 1.75-2.00 percent, widening a gap between the policy rates of South Korea and the United States.

Despite the widened gap, the BOK froze its benchmark rate on growing concern about the US protectionist moves that would hit hard the export-driven South Korean economy depending heavily on global trade for growth.

Amid the US protectionist moves, volatility in the South Korean foreign exchange market picked up. The standard deviation in the won/dollar exchange rate was 19.1 won per US dollar in June, the highest since March 2016.

The standard deviation means how far away the daily market close deviates from the monthly average won/dollar exchange rate.

South Korea's exports, which account for about half of the economy, amounted to 14 billion US dollars in the July 1-10 period, down 1.9 percent from the same period of last year.

Outbound shipments of South Korea topped 50 billion US dollars for the fourth consecutive month through June, but the exports posted a negative growth in April and June except for the May expansion.  

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