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The Bank of Korea Base Rate
The Bank of Korea Base Rate is the reference policy rate applied in transactions between the Bank of Korea and financial institutions, such as repurchase agreements (RPs) and the Bank's liquidity adjustment deposits and loans. It is called the Base Rate for short.
The Bank of Korea uses the Base Rate as a fixed bid rate for its sales of 7-day RPs and as the minimum bid rate for its purchases of 7-day RPs. The interest rate for liquidity adjustment deposits is 50bp below the Base Rate, with a minimum of 0%. For liquidity adjustment loans. the interest rate is 50bp above the Base Rate, and if the Base Rate is less than 0.5%, it will be twice the Base Rate.
The Monetary Policy Board of the Bank of Korea meets eight times per year to determine the Base Rate, taking into overall consideration the price movements, domestic and overseas economic and financial market conditions and so on. The Base Rate has a prompt impact on the call rate, i.e. overnight inter-bank lending rate, and this leads to changes in short- and long-term market rates and deposit and loan rates, thus ultimately influencing activities in the real economy.