SEOUL (Reuters) – A voting board member, Shin Sung-hwan, who dissented in the Bank of Korea’s decision to keep policy rates unchanged in January, said the economy faces bigger risks due to domestic political turmoil and U.S. policy changes, minutes from the bank’s meeting showed on Tuesday.
The Bank of Korea on Jan. 16 unexpectedly voted 6-1 to keep its policy interest rate unchanged and signalled it needed to wait for the domestic political turmoil weighing on the currency to stabilise before it could make further rate cuts.
Only Shin voted to cut interest rates by 25 basis points on Jan. 16, when the bank decided to keep its benchmark interest rate unchanged at 3.00%.
Most, including Shin, said the bank should be open to near-term policy easing in the face of increased political and external uncertainties as South Korea continues to grapple with the worst political turmoil in decades after impeached President Yoon Suk Yeol’s brief imposition of martial law.
They also cited uncertainties related to U.S. President Donald Trump’s trade policies, describing this as clouds hanging over the trade-reliant nation.
“It is desirable to cut the interest rate after examining the effect of the last two interest rate cuts and observing the policy direction of the new U.S. government, as well as the U.S. Federal Reserve’s interest rate decision, and the political and economic situation at home and abroad,” one of the board members said.
Only dissenters were identified in the minutes.
South Korea’s exports fell in January for the first time in 16 months and at the sharpest pace in a year and a half due to U.S. tariff uncertainty and an unfavourable calendar effect, preliminary data released on Saturday showed.
(Reporting by Cynthia Kim; Editing by Ed Davies)
