South Korea keeps rates steady despite coronavirus risks

The Central Bank of South Korea kept its rates steady and unmoved on Thursday, killing hopes for monetary easing, despite the glaring coronavirus risks as it continues to spread in the country, threatening to hurt the fourth-largest economy in Asia.

The base rate of the policy board of the Bank of Korea remained at 1.25%. The last rate cuts imposed by the bank were in October 2019. Central bank governor Lee Ju-yeol will hold a press conference, after the announcement of its forecast and inflation outlook.

“A key difference today, compared to SARS and MERS epidemic, is that policy ammunition is relatively limited. We think the BOK will still respond to the pandemic shock this time, but in a reactive rather than pre-emptive manner,” Ma Tieying, DBS economist said.

One factor that analysts suspect that impedes the BOK from easing interest rates is the weakening Won as well as capital outflow risks, not to mention the nature of the country’s economy being heavily dependent on global trade.

The number of coronavirus cases in South Korea continues to rise and now second to China in the most number of virus cases worldwide.