Bank of Korea Raises 2021 Inflation Forecast; Holds Rate Steady -- Update

South Korea's central bank on Thursday raised its inflation forecast for this year while keeping its policy rate unchanged at a record-low 0.50%, as widely expected.

The Bank of Korea's move signals monetary-policy support will remain in place despite some signs of recovery as the country continues fighting a Covid-19 resurgence.

The bank now expects consumer prices will rise 1.3% in 2021, at a stronger pace than its November projection of 1.0%. It expects the country's gross domestic product to expand 3.0% this year, unchanged from its earlier forecast.

For 2022, the bank expects the South Korean economy to expand 2.5% and inflation to average 1.4%.

All 13 economists polled by The Wall Street Journal ahead of the decision expected the bank to stand pat through 2021.

South Korea's export-led economy has weathered the pandemic-driven suppression of global trade well, with shipments overseas expected to grow for a fourth straight month in February.

Still, uncertainties around the resurgence of the pandemic and its impact on consumer spending have weighed on the economic recovery.

The bank made cuts totaling 75 basis points in 2020 to spur growth, as the government also ramped up pandemic-relief fiscal stimulus.

The South Korean economy contracted 1.0% in 2020.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com


  (END) Dow Jones Newswires
  02-24-21 2032ET
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