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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 a way 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 bank to continue but dial back its policy tightening, with some forecasting it could start cutting rates in 2023 to support growth.
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 for seven months in a row.
