SEOUL, April 18 (Xinhua) -- South Korea's central bank on Thursday froze its benchmark interest rate at 1.75 percent on worry about economic slump caused by weak export.
Bank of Korea (BOK) Governor Lee Ju-yeol and six other monetary policy board members decided unanimously to keep the 7-day repurchase rate on hold at 1.75 percent. They raised it by 25 basis points to the current level in November last year.
It was in line with market expectations. According to a Korea Financial Investment Association (KFIA) survey of 200 fixed-income experts, 97 percent predicted the rate freeze.
The rate on hold came on rising concern about economic slowdown stemming from the falling export, which takes up about half of the export-driven economy.
The country's export kept falling since December last year due mainly to lower price for semiconductor, which had led the overall export expansion in the past, and the global economic slump.
Despite the rising worry about the economic slowdown, the BOK governor told a press conference that it was not time to consider cutting the policy rate from the current level.
The International Monetary Fund (IMF) maintained its growth outlook for the South Korean economy in 2019 at 2.6 percent despite the lowered forecast for the global economy by 0.2 percentage points to 3.3 percent.
The IMF recommended the South Korean government be required to draw up a supplementary budget plan worth about 9 trillion won (7.9 billion U.S. dollars), or 0.5 percent of the country's gross domestic product (GDP), to meet the government's growth target of 2.6-2.7 percent this year.
Earlier this year, global credit rating companies Moody's and Standard & Poor's cut this year's growth outlooks for the South Korean economy to 2.1 percent and 2.4 percent each.
The finance ministry planned to submit its extra budget bill of less than 7 trillion won (6.2 billion U.S. dollars) later this month to the National Assembly.
Reducing pressure on the BOK to hike rates, the U.S. Federal Reserve turned dovish in its monetary policy position after lifting its benchmark rate four times last year to a range of 2.25-2.50 percent.
The Fed's rate hikes last year widened a gap between interest rates of South Korea and the United States, boosting concerns here that foreign funds could flow out of the South Korean financial market to seek high-yield assets.
The growth rate of household debts in South Korea slowed down recently, while the consumer price inflation stayed low. It gave a leeway to the BOK in tightening its monetary stance.
The finance ministry said in its monthly economic report, called Green Book, earlier this month that downside risks expanded for the South Korean economy due to the global economic slump and the worsening of the chip industry.
Production in all industries fell 1.9 percent in February from a month earlier. Output in the mining and manufacturing sectors dipped 2.6 percent, with those among services firms and builders skidding 1.1 percent and 4.6 percent each.
Retail sales, which reflect private consumption, slipped 0.1 percent in the month, with facility investment sliding 1.9 percent.
Consumer price added 0.4 percent in March from a year earlier on lower prices for farm goods and oil products. It was the lowest headline inflation in 32 months.