The Bank of Korea left rates at 1.25% in January, as expected

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The Bank of Korea (BoK) left interest rates unchanged at 1.25% for a seventh consecutive month in January, as expected.

The decision was predicted by all 23 economists polled by Thomson Reuters.

On the domestic economy, the BOK said that while the slump in exports has eased, it judged that “the pace of domestic economic growth to have slowed somewhat, as the recovery in domestic demand activities has weakened”.

It also said that employment conditions “have been somewhat sluggish”, noting that “the number of persons employed having continued to decline in the manufacturing sector while its trend of increase in the service sector has slowed as well”.

On inflation, it said that consumer price inflation will gradually rise to near the 2% target level by around the middle of this year, largely due to higher oil prices.

It also noted that core inflation will maintain a level “in the mid-to-upper 1% range”.

Towards developments in the housing market, an important area for policy consideration, it said that “the upward trends of housing sales prices have slowed”, noting that while household lending “has continued its substantial increase”, lending from banks had “shown signs of lessening recently”.

On the external economy, it said that the global economic recovery had expanded somewhat, “led by the US and some emerging market economies”.

Looking ahead, the BoK said that the Korean economy was likely to continue its trend of moderate growth, forecasting a rate of GDP expansion in 2017 in the “mid-2% range”.

“The trend of recovery in domestic demand activities is expected to be limited, due to deteriorations in economic sentiment for example, but exports will likely improve thanks chiefly to the global economic recovery,” it said.

Globally, it said that the “economic recovery will be affected by factors such as the directions of the new US government’s economic policies, the pace of monetary policy normalization by the US Federal Reserve, and the movements toward spreading trade protectionism”.

BoK governor Lee Ju-yeol will enlighten markets on the decision shortly. He’ll hold a press conference at 11.20am in Seoul (1.20pm AEDT)

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