S.Korea c.bank keeps rates steady as COVID-19 cases rise, sounds more upbeat on growth (updated)

Korea Investment Holdings Co

15/04/2021 02:03

* All 32 analysts surveyed saw the base rate steady
    * Base rate unchanged at 0.50%, analysts see hikes from 2022
    * BOK highlights surging coronavirus cases as fresh downside
risk

 (Recasts after Governor Lee news conference)
    By Cynthia Kim and Joori Roh
    SEOUL, April 15 (Reuters) - South Korea's central bank kept
interest rates at record lows on Thursday and said it was too
early to discuss a change in the direction of monetary policy,
even as it sounded more upbeat on growth and expected inflation
to accelerate.
    Bank of Korea (BOK) kept the seven-day repurchase rate
 KROCRT=ECI  unchanged at 0.5%, as widely forecast in a Reuters
poll, amid concerns that rising coronavirus cases could derail
the economic recovery.  urn:newsml:reuters.com:*:nL4N2M5396
    The central bank has kept rates at that level since May
2020, after it cut them by 75 basis points last year to help the
economy cope with the fallout of the COVID-19 pandemic. 
    While the BOK said robust exports and an uptick in
consumption will continue to power the economy, it said
uncertainties remained and it would continue to monitor the
coronavirus outbreak.  urn:newsml:reuters.com:*:nL1N2LU00K
    "Looking at how the global economy and domestic activities
fared in the first quarter... growth of mid-3% is very possible
(in 2021)," Bank of Korea Governor Lee Ju-yeol said at a news
conference.
    He expects the economy to expand between 3% and 4% this
year, compared with a previous forecast for 3% growth in 2021. 
    "But it's a concern that the resurgence of the coronavirus
has hardly subsided, and that the inoculation rate remains at a
2% range."
    South Korea has reported around 700 new coronavirus cases
per day this week, a level not seen since January.  urn:newsml:reuters.com:*:nL1N2M701V
    Analysts expect surging home prices and faster inflation to
push policymakers to start raising interest rates in 2022, but
not sooner, due to uncertainty over the recent spike in
coronavirus cases. 
    South Korea's consumer price inflation hit a 14-month high
of 1.5% in March and the BOK said on Thursday inflation will run
around 2% before declining. Policymakers are also keeping an eye
on rising property prices amid concerns they could swell an
already hefty household debt pile.  urn:newsml:reuters.com:*:nL1N2LU2UI
    "(The BOK) could turn on the blinker by the end of the
fourth quarter and possibly raise interest rates in the first
quarter of next year," said Ahn Jae-kyun, fixed income analyst
at Korea Investment & Securities.
    "How the virus spread would play out is still hard to
predict, but it seems the market is focusing on the brighter
economic assessment." 
    South Korean bond futures fell after Lee's news conference,
with the June contract  KTBc1  dropping as much as 0.17 points. 
    Asia's fourth largest economy contracted by 1.0% in 2020,
the worst since 1998, due to the fallout of the COVID-19
pandemic. 
    ($1 = 1,109.4000 won)

 (Reporting by Cynthia Kim; Editing by Ana Nicolaci da Costa)
 ((Cynthia.Kim@thomsonreuters.com; 822 3704 5655; Reuters
Messaging: cynthia.kim.thomsonreuters.com@reuters.net))