Bank of Korea steadies rate, trims GDP forecast amid virus surge

The Bank of Korea kept its key interest rate steady on Thursday. The central bank’s predicted move came nothing as a surprise as policymakers are more pressured to take more actions to prevent the resurging coronavirus infections from deterring the recovery of the country’s virus-beaten economy.

The BOK held its 0.5% seven-day repurchase rate as anticipated by 22 analysts surveyed by Bloomberg. Moreover, the central bank also remarked that it now expects the country’s economy to shrink 1.3% this year. The new forecast is worse than its 0.2% contraction prediction in May. The BOK also sees inflation going up 0.4% from a previous forecast of 0.3%.

After the BOK slashed its economic forecast, the country’s 10-year bond yield went down 3 basis points to 1.38%. The won advanced 0.1% to 1,185.65 per dollar amid broad risk-on sentiment.

To date, the BOK has cut its benchmark rate by 75 basis points year-long to cushion the impact of the coronavirus pandemic, to go along with purchasing bonds and supplying liquidity to keep markets active. Ultimately, the South Korean government has also implemented the biggest stimulus on record ever, preparing three extra budgets for this year.