S. Korea’s natural interest rate estimated at -0.2-1.3 pct: BOK economist

The natural interest rate in South Korea is estimated at between -0.2 percent and 1.3 percent in the first quarter of the year, an economist at the Bank of Korea (BOK) said Friday. During an international conference hosted by the central bank, Do Kyeong-tak said the country's natural interest rate has been on the decline since 2000 but rebounded slightly after the coronavirus pandemic. More specifically, the natural interest rate in Asia's fourth-largest economy was estimated at between 1.4 and 3.1 percent in the first quarter of 2000, but fell to between -1.1 and 0.5 percent in the first three months of 2020, he said The natural interest rate is usually known as the real interest rate at which a central bank's monetary policy stance is neither accommodative nor restrictive. It is also the rate that is consistent with stable inflation and a closed output gap in the medium term. Earlier this month, South Korea's central bank froze its key rate at 3.5 percent for the 11th straight session, as it jacked up its growth estimate for the year amid high inflation. The BOK has continued to stand pat following rate freezes since February last year after delivering seven consecutive rate hikes from April 2022 to January 2023. The rate freeze took place as inflationary pressure in Asia's fourth-largest economy still remains high, while the country's economy is expected to grow faster than expected this year on the back of robust exports. Source: Yonhap News Agency