South Korea government think tank says loose monetary policy should continue

© Reuters. FILE PHOTO: Cranes and shipping containers are seen at Pyeongtaek port in Pyeongtaek, South Korea, July 9, 2020. REUTERS/Kim Hong-Ji

SEOUL (Reuters) – South Korea’s top government think-tank on Thursday called on the central bank to maintain loose monetary policy for the time being and raised its economic growth forecasts for the current year.

“As the economic recovery has not been strong, and since the trend of inflation has been underperforming the target inflation for a long while, the need to adjust the monetary policy stance is not high for now,” the state-run Korea Development Institute (KDI) said in a bi-annual report on the economy.

“Accommodative monetary policies should stand to support economic recovery for the time being.”

Still, the KDI raised its economic growth forecast for this year to 3.8% from 3.1% previously, citing robust chip exports and capital investments.

The Bank of Korea (BOK) on April 15 kept the seven-day repurchase rate [KROCRT=ECI] unchanged at 0.5%, as expected, amid concerns that rising coronavirus cases could derail the economic recovery.

The KDI’s new projection comes after the government raised this year’s growth forecast to 4% this week.

The BOK sees the economy expanding at 3% to 4% this year after contracting by 1.0% in 2020.

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