SEOUL, July 10 (Xinhua) -- South Korea's central bank on Thursday froze its policy rate to see the effect of two rate cuts in the first half.
Bank of Korea (BOK) Governor Rhee Chang-yong and other monetary policymakers decided to leave the benchmark seven-day repurchase rate unchanged at 2.50 percent.
It was in line with market expectations. According to the Korea Financial Investment Association's poll of 100 fixed-income experts, 93 percent predicted the rate on hold this month.
The BOK slashed the policy rate by 25 basis points in February and May after reducing it by the same basis points in October and November last year.
Political uncertainty eased with the launch of the new government under President Lee Jae-myung who took office on June 4.
The composite consumer sentiment index (CCSI), which gauges the sentiment of consumers over economic situation, increased 6.9 points from a month earlier to 108.7 in June.
External uncertainty remained following the U.S. tariffs imposition. The Asian country's export to the United States retreated 3.7 percent in the first half from a year earlier.
The composite business sentiment index (CBSI) in all industries decreased 0.5 points over the month to 90.2 in June, after going up for the past three months.
The BOK said in a statement that the sluggishness in economic growth somewhat eased as consumption improved due to the resolution of domestic political uncertainty amid the continued export growth.
The central bank expected the Asian economy's export to slow on the impact of U.S. tariffs, saying the future path of economic growth faced significant uncertainties concerning developments in trade negotiations with the U.S.
Concerns remained over massive household debts and a broad gap between the South Korean and the U.S. interest rates.
Debt owed by households to deposit-taking banks totaled 1,155.3 trillion won (843.1 billion U.S. dollars) at the end of May, up 5.2 trillion won (3.8 billion dollars) from a month earlier.
It continued to expand since February as higher housing transactions boosted demand for home-backed loans.
The number of apartment transactions across the country had been roughly on the increase with 26,000 in January, 39,000 in February, 50,000 in March and 41,000 in April.
The U.S. Federal Reserve froze its target range for the federal funds rate at 4.25-4.50 percent last month, resulting in a rate difference with South Korea at 2.00 percentage points.
Any hasty rate cut in South Korea may encourage foreign funds to flow out of the local financial market, raising the won/dollar exchange rate at an excessively rapid pace.
Affected by the removed political uncertainty at home, the average won/dollar exchange rate retreated to 1,394.49 won per dollar in May from 1,444.31 won in April. (1 won equals 0.00073 U.S. dollars) ■
