BOK Freezes Interest Rate Again
28 February, 2021
The Bank of Korea on Thursday froze interest levels at 0.5 percent again, the record-low level these were fixed at last May. It maintained its growth forecast for the year at three percent but brought up its outlook for inflation in one percent to at least one 1.3 percent.
The BOK said the freeze, that was widely expected, is because of "private consumption, employment remaining weak despite rising global expectations of an monetary recovery because of coronavirus vaccinations."
The BOK's monetary policy board said in a written report, "Private spending remains weak as a result of protracted lockdown and employment is falling." It stated the global recovery continues to be sluggish because of travel curbs amid the pandemic.
BOK Governor Lee Ju-yeol warned of rising yields of Korean and U.S. government bonds, that have sent stock markets tumbling. "A rise in market rates brings about a growth in lending rates, placing pressure on households and businesses with loans," he said. "The currency markets will also most likely continue to be volatile for the moment."
Bond yields continue steadily to rise seeing as governments all over the world try to increase money for pump-priming measures to cushion their economies against the pandemic. This tarnishes the luster of sovereign bonds and triggers yields to rise.
The Korean government plans to improve around another W20 trillion to invest in coronavirus-relief payments and the U.S. another US$1.9 trillion (US$1=W1,109). The majority of that will be raised by issuing bonds.
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