By Kwanwoo Jun
South Korea's central bank has eased the pace of interest-rate increases to curb high inflation, lowering its 2023 growth and inflation forecasts.
The Bank of Korea raised the benchmark seven-day repurchase rate by 25 basis points to 3.25% on Thursday, as expected, after an outsized 50-basis-point increase in October.
The downshift came as the bank cut its gross domestic product growth forecast sharply next year and expected inflation to ease moderately, but still remain well above the bank's targeted 2%.
The bank now expects the country's GDP to grow 1.7% in 2023, slower than its August forecast of 2.1%. It expects consumer prices to rise 3.6% in 2023, compared with its earlier projection of 3.7%.
Eighteen out of 20 analysts surveyed by The Wall Street Journal before the rate decision had forecast a quarter-percentage-point rate increase.
Most analysts expect the central bank to continue its policy tightening, which could be dialed back, with some forecasting the BOK could start cutting rates in 2023 to support growth.
BOK Gov. Rhee Chang-yong told a news conference Thursday that the latest rate decision was unanimous, citing the recent easing of foreign-exchange risks.
BOK board members still remained divided over the terminal rate for the current policy cycle, which ranges between 3.25% and 3.75% among them, Mr. Rhee said.
South Korea's economy grew 4.1% in 2021, but its growth has lost steam this year, with exports falling in October for the first time in two years on weak global demand. The country posted a trade deficit seven months in a row.
The bank keeps its 2022 GDP growth forecast for the country unchanged at 2.6%, expecting inflation to average 5.1% this year.
The BOK's monetary policy board said in a statement after the rate decision that it had no immediate plan to end its policy tightening.
"The Board judges that the policy response to ensure price stability should be continued as inflation has remained high," the BOK said.
Write to Kwanwoo Jun at firstname.lastname@example.org
(END) Dow Jones Newswires