Roundup: S. Korea freezes benchmark rate on concerns about U.S. protectionist moves

SEOUL, April 12 (Xinhua) -- South Korea's central bank froze its benchmark interest rate Thursday on rising concerns about the U.S. protectionist moves that can reduce global trade.

Bank of Korea (BOK) Governor Lee Ju-yeol and six other policy board members decided to leave the seven-day repurchase rate unchanged at 1.5 percent.

The bank raised the rate by 25 basis points in November last year to the current level, marking the first rate increase in almost six and a half years.

The rate freeze was in line with market expectations. According to a Korea Financial Investment Association (KFIA) poll of 200 fixed-income experts, 89 percent predicted the rate on hold.

The BOK refrained from altering the policy rate on concerns that the U.S. protectionist moves could trigger a trade war and impact global trade.

Trade experts here saw little possibility for the current trade friction between China and the United States to become a real trade war, but the U.S. protectionist moves would shrink trade globally and hit hard the South Korean economy which depends on exports for about half of its GDP.

Governor Lee told a press conference after the rate-setting meeting that it was generally thought that trade dispute between China and the United States would not lead to an all-out trade war.

Lee, however, noted that the trade dispute was not expected to be resolved immediately.

The country's headline inflation stayed below the BOK's inflation target of 2 percent for the past months, reducing pressure on the BOK to tighten its monetary policy stance.

Consumer prices rose 1.3 percent in March from a year earlier, after gaining 1 percent in January and 1.4 percent in February, respectively.

The top central banker told reporters that the headline inflation was forecast to be faster later this year on recovered domestic demand though lower prices for oil and livestock products slowed down the inflation.

Despite the rate freeze decision in April, expectations ran high for the BOK to raise rates in the foreseeable future as South Korea's policy rate got lower than the U.S. counterpart last month.

The U.S. Federal Reserve lifted its benchmark rate by a quarter percentage point in March to a range of 1.50-1.75 percent, surpassing the BOK's target rate of 1.5 percent.

The reversal between the policy rates of South Korea and the United States could trigger foreign capital flow out of the South Korean financial market.

Household debts here continued to rise amid the prolonged low-rate trend. The government under President Moon Jae-in announced measures to control speculative investment in the real estate market.

Governor Lee, who started his second, four-year term as the top central banker this month after being reappointed by President Moon, was forecast to follow the Moon government's property stabilization policy. Enditem