SEOUL, Aug. 24 (Yonhap) — The Bank of Korea (BOK) is widely expected to freeze its key rate at a record low of 0.5 percent this week amid limited room for further cuts and the unstable housing market, a poll showed Monday.
In a survey by Yonhap Infomax, the financial news arm of Yonhap News Agency, all 14 analysts polled predicted the BOK would keep the policy rate steady at its rate-setting meeting, slated for Thursday.
They also forecast the BOK to stand pat at the rate throughout this year.
To bolster the slumping economy, the BOK slashed its key policy rate in May to a record low of 0.5 percent after delivering an emergency rate cut of half a percentage point in March.
Experts said the rate freeze is anticipated this week, as the policy rate appears to have reached a low level where further cuts may not be effective in propping up economic recovery.
“Despite the pandemic-caused uncertainties, the policy rate is expected to be frozen for a considerable period of time due mainly to limited room for further cuts,” said Kim Sun-tae, an economist at KB Kookmin Bank.
The momentum for economic recovery is expected to remain week amid a recent spike in coronavirus cases, BOK Gov. Lee Ju-yeol said in a report to the National Assembly on Monday.
South Korea reported 266 more cases of COVID-19 on Monday after its daily new virus cases topped 300 for the third straight day. The country has reported nearly 2,900 virus cases over the past 11 days.
Experts said the BOK may focus on non-conventional policy tools, such as state bond purchases, rather than rate cuts, in a bid to respond to the economic slump caused by the COVID-19 pandemic.
“In light of the already-low rate level and the housing market, it will not be easy for the BOK to further trim the rate for the time being,” Baek Yoon-min, an analyst at Kyobo Securities Co., said.
Analysts said their focus will be on how much the BOK will trim economic outlook for 2020 this week.
In May, the central bank forecast Asia’s fourth-largest economy would contract 0.2 percent this year and grow 3.1 percent next year.
Earlier this month, the Organization for Economic Cooperation and Development (OECD) predicted that South Korea’s economy is likely to shrink 0.8 percent in 2020 from a year earlier thanks to its successful response to the pandemic. But if another wave of the virus outbreak occurs, the economy is expected to contract 2 percent this year, it added.
“Taking into account jitters over another wave of the COVID-19 pandemic and economic uncertainty in the second half, the BOK may slash its economic outlook by a large margin,” said Gong Dong-rak, a fixed-income analyst at Daishin Securities Co.