South Korea’s central bank left its key interest rate at a record low yesterday after the country’s economic growth slowed at the end of last year, unemployment spiked to a nine-year high last month and concerns grew over financial turmoil in Europe.
The Bank of Korea kept the benchmark seven-day repurchase rate at 2 percent at a monthly policy meeting for a 12th straight month.
South Korea’s economic growth slowed in the fourth quarter of last year on weakness in manufacturing, construction and exports, a sign that the country’s vigorous recovery from the depths of the global economic meltdown is losing steam.
GDP grew 0.2 percent in the three months ended Dec. 31 compared with the previous quarter. South Korea’s economy, Asia’s fourth largest, had expanded 3.2 percent in the third quarter, its strongest performance in more than seven years.
The country’s jobless rate surged to a nine-year high last month as the number of people seeking work increased. The unemployment rate rose to 5 percent from 3.5 percent in December, the Korea National Statistical Office said on Wednesday. That was the highest since 5.1 percent in March 2001.
The central bank’s monetary policy committee said in a statement it would keep rates low “for the time being” to help sustain the country’s recovery.
“Domestic economic activity has continued on a recovering trend, which is expected to be maintained,” the committee said, citing steady increases in exports and domestic demand as well as gains in production. “There still, however, remains uncertainty as to the economic growth path due to the risk of government debt crises in some European countries.”
Kwon Goohoon, economist at Goldman Sachs in Seoul, said the BOK’s rate freeze was no surprise and came after last month’s weak employment data and disappointing fourth-quarter GDP, which, he wrote in a commentary, “point to still weak underlying domestic demand.”
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