South Korea's Central Bank Expected to Freeze Key Interest Rate to Boost Consumer Spending

Strategic Insights -

South Korea's central bank is predicted to maintain its key interest rate at 3.5 percent for a second consecutive month in December to promote consumer spending, a crucial factor in the country's economic recovery. Analysts expect the Bank of Korea to freeze the rate, with 17 out of 20 economists surveyed predicting a hold on the interest rate. The decision comes as consumer spending remains weak, although the economy is showing signs of gradual recovery. Vice Finance Minister Bahk Byong-won emphasized the need to support consumer spending and investment to sustain the economic recovery.

Key Takeaways:

  • The Bank of Korea is expected to maintain its key interest rate at 3.5 percent for a second consecutive month to support consumer spending.
  • 17 out of 20 economists surveyed predict the bank will freeze the rate, which represents the interest on overnight inter-bank loans.
  • Consumer spending, a key determinant of economic recovery, is still weak, growing only 2.7 percent in the first nine months.
  • Vice Finance Minister Bahk Byong-won stated that consumer spending and economic recovery appear to be slowing down in the fourth quarter.
  • The central bank's decision to maintain a low interest rate is expected to encourage local consumers to spend freely and boost economic growth.

Statistics:

  • 17 out of 20 economists surveyed predicted the bank would freeze the rate.
  • Consumer spending grew 2.7 percent in the first nine months.
  • The economy is expected to expand 4 percent this year, while the central bank expects a 3.8 percent advance.
  • South Korea's exports rose 13 percent in November to a record US$26.07 billion.
  • Industrial output gained at its fastest pace in nine months in October.

Sources:

  • Yonhap Infomax
  • Yonhap News Agency
  • Hyundai Securities
  • Woori Investment & Securities
  • CJ Investment & Securities
  • Korea Investment & Securities
  • Hannuri Securities
  • Korea Development Bank
  • Daewoo Securities
  • Daishin Economic Research Institute
  • Hanwha Securities
  • SK Securities
  • Korea Small Business Institute
  • Hana Securities
  • Hyundai Securities
  • Daehan Investment & Securities
  • Mirae Asset Securities
  • Standard Chartered First Bank Korea
  • Citibank Korea
  • JP Morgan
  • Asia Pulse