South Korea's central bank indicated a more accommodative monetary policy Thursday as it planned to closely monitor the effect of the COVID-19 outbreak and the stimulus package from other countries to combat the coronavirus.
The Bank of Korea (BOK) said in its biannual monetary policy report to the National Assembly that it would maintain an accommodative monetary stance on expectations for a moderate growth of the economy and a low inflationary pressure.
The adjustment on the policy stance will be made after closely monitoring the COVID-19 spread, its impact on the economies at home and abroad, and the monetary policy responses from major economies, the report noted.
The U.S. Federal Reserve slashed its benchmark interest rate by 50 basis points to a range of 1.00-1.25 percent on March 3 in its first emergency move since the 2008 global financial crisis.
The BOK left its target rate unchanged at a record low of 1.25 percent in late February, but expectations ran high for the BOK's rate cut given that the U.S. benchmark rate stays below the South Korean one.
The World Health Organization (WHO) has declared the COVID-19 a global pandemic. As of Thursday morning local time, South Korea's confirmed cases topped 7,800.
The BOK said the local financial market's recovery from the COVID-19 outbreak had been slower than the previous outbreaks of infectious disease, noting that stocks and long-term market rates fell deeper than before.
Foreign investors showed a risk-off attitude by selling off domestic stocks and purchasing domestic bonds.
The report forecast that the COVID-19 outbreak would have a more negative effect on the South Korean economy than the prior infectious disease outbreaks did.
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