The Bank of Korea's Monetary Policy Committee (hereinafter referred to as the Monetary Policy Committee) set the benchmark interest rate back to 2.4% today (25th) after February and April.

With consumer price inflation (3.50%) falling to 3% last month for the first time in 7 months, with inflationary pressures somewhat relieved, the Fed sees no reason to raise interest rates too much to throw cold water on a weak economy and finances.

With three consecutive freezes keeping the benchmark rate at 14.3% for more than four months since Jan. 3, the market is expected to fully solidify its view of the terminal rate at 1.13% for this hike and increase expectations for a rate hike in the second half of the year.

Today, Han decided to freeze again, and the unstable economic situation had the biggest impact on it.

In the first quarter, Korea's real gross domestic product (GDP) growth rate (4.3 percent quarter-on-quarter) barely avoided negative growth for the second consecutive quarter thanks to private consumption, and the current account deficit in March also avoided a deficit for the third consecutive month due to dividends from domestic companies and overseas subsidiaries.

However, the trade balance based on customs clearance is still in deficit for 50 months until April (-$3.50 billion).

The heightened risks in financial markets also appear to have been taken into account.

This is because, if the global financial unrest continues after the Silicon Valley Bank (SVB) crisis and continues to press for interest rate hikes, insolvency problems may erupt from vulnerable savings banks and credit card companies.

Ahead of today's meeting, some speculated that the BOK could raise its benchmark interest rate by another 1.0 percentage points to close the gap with the U.S., which has widened to its highest level ever (3.2 percentage points).

However, since there has not yet been a clear weakening of the won (an increase in the won/dollar exchange rate) and foreign fund outflows, it is interpreted that Han has decided that it can "hold on without further hikes."

Moreover, as the Federal Reserve's (Fed) freeze on its benchmark interest rate (policy rate) in June gained momentum, the pressure on the "widening of the reversal" has eased somewhat.

The Federal Reserve froze its benchmark interest rate again today, keeping the gap with the U.S. at 3.4 percentage points (26.2% in South Korea and 14.1-75.0% in the U.S.).

(Photo=Yonhap News)