South Korea government think tank says loose monetary policy should continue

South Korea’s top government think-tank called on the central bank to maintain loose monetary policy for the time being. It has raised its economic growth forecasts for the current year.

In a bi-annual report on the economy, the state-run Korea Development Institute (KDI) said that as the economic recovery has not been strong, and since the trend of inflation has been underperforming the target inflation for a long while, the need to adjust the monetary policy stance is not high for now. The report also says that accommodative monetary policies should stand to support economic recovery for the time being.

Citing robust chip exports and capital investments, the KDI raised its economic growth forecast for this year to 3.8% from 3.1% previously. The seven-day repurchase rate [KROCRT=ECI] has been kept unchanged at 0.5%, by the Bank of Korea. And this is an expected scenario amidst the derailing economic recovery in this pandemic situation.

After the government has raised this year’s growth forecast to 4%, there is new projections coming from the KDI. The economy expanding at 3% to 4% this year, after contracting by 1.0% in 2020. This is foreseen by the BOK.