(LEAD) BOK says will keep easing policy, warns of economic imbalance

(ATTN: RECASTS headline, lead, ADDS more info in para 3)
SEOUL, Jan. 15 (Yonhap) -- South Korea's top central banker said Friday the Bank
of Korea (BOK) will maintain its soft monetary policy for the time being to
support the economic recovery, but warned of an economic imbalance brought by
long streak of low rates.

"While maintaining the current rate policy to help support the economic recovery,
the bank should be careful not to allow its long-running accommodative policy to
bring about an economic imbalance," BOK Gov. Lee Seong-tae said in a meeting with
senior central bank officials.
Lee said economic uncertainties at home and abroad are making setting the rate
policy difficult.
The BOK froze its key interest rate at a record low of 2 percent for the 11th
straight month last week in a monthly meeting attended by the country's vice
finance minister, the first time in over 10 years that someone in that post has
attended the gathering.
The South Korean economy is recovering at a faster-than-expected pace, sparking
debate over when the BOK should raise borrowing costs.
The central bank reiterated in a 2010 monetary policy report that it will
maintain an easing stance for the time being, but plans to gradually adjust the
policy this year by taking into account financial and economic conditions.
"The Korean economy is forecast to grow more sharply this year than 2009 as
exports will likely remain brisk and the growth momentum by the private sector
becomes stronger," Lee said.
Asia's fourth-largest economy chalked up a surprise 3.2-percent gain in the third
quarter from three months earlier, the fastest expansion in more than seven
years. The government predicted in December that the economy will grow 5 percent
this year after an estimated 0.2 percent expansion in 2009.
But the administration has said that it will stick to an "expansionary" policy
for the time being as the economic recovery has yet to gain solid footing.
The government said last Thursday that the vice finance minister will regularly
attend the BOK's rate-setting meeting starting this year to voice his opinion on
the overall rate policy direction and economic management. Experts say the move
is widely seen as being aimed at preventing the BOK from hiking the rate in the
near term.
sooyeon@yna.co.kr
(END)

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