SEOUL, Aug. 28 (Xinhua) -- South Korea's central bank on Thursday froze its policy rate for the second straight time amid lingering uncertainties at home and abroad.
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, 84 percent predicted the rate on hold this month.
The BOK made the rate freeze decision in July and August after cutting the policy rate by 25 basis points in February and May this year and in October and November last year.
Despite lingering concerns about economic slump, the central bank made no change in the key rate due to massive household debt and the remaining demand to buy new homes with borrowed money.
Debt owed by households to deposit-taking banks totaled 1,164.2 trillion won (836.8 billion U.S. dollars) at the end of July, up 2.8 trillion won (2.0 billion dollars) from a month earlier, according to the Bank of Korea (BOK).
It continued to expand for the sixth consecutive month since February on the back of strong demand for mortgage loan.
The number of apartment transactions across the country had been on the increase with 39,000 in February, 41,000 in April and 53,000 in June.
The new government of President Lee Jae-myung, who took office in early June, announced a set of measures later that month to restrict demand for home purchase with borrowed money.
Concerns remained over a broad gap between the South Korean and the U.S. interest rates, contributing to the rate freeze this month.
The U.S. Federal Reserve maintained its target range for the federal funds rate at 4.25-4.50 percent, 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 domestic financial market, raising the won to dollar exchange rate at an excessively rapid pace.
The new government implemented supplementary budget plan to provide cash handout, which was aimed to boost consumer demand, but external uncertainty lingered following the U.S. tariffs imposition.
The composite consumer sentiment index (CCSI), which gauges the sentiment of consumers over the economic situation, added 0.6 points over the month to 111.4 in August, continuing to go up for the fifth straight month.
The composite business sentiment index (CBSI) in all industries rose 1.0 point from a month earlier to 91.0 in August, after sliding for the past two months.
South Korea's export mounted 5.9 percent in July from a year earlier, keeping an upward trend for two consecutive months, while the Asian country's export to the United States added 1.4 percent, marking the first rebound in four months.
The finance ministry revised down its 2025 growth forecast to 0.9 percent last week from 1.8 percent estimated in January.
The inflation-adjusted real gross domestic product (GDP), which grew 2.0 percent in 2024, was expected to expand 1.8 percent in 2026. ■