ID :
26804
Mon, 10/27/2008 - 10:12
Auther :
Shortlink :
https://www.oananews.org//node/26804
The shortlink copeid
BOK makes emergency rate cut to 4.25 pct
(ATTN: ADDS more details and remarks in paras 6, 15-16; TRIMS throughout) By Kim Soo-yeon
SEOUL, Oct. 27 (Yonhap) -- South Korea's central bank slashed its key interest rate on Monday by a larger-than-expected 0.75 percentage point in a bid to help ease financial strains facing local banks and companies.
In a blitzkrieg move, Bank of Korea (BOK) Gov. Lee Seong-tae and his six fellow
policymakers lowered the benchmark 7-day repurchase agreement rate to 4.25
percent at an unscheduled policy meeting. It is the first time for the BOK to
trim the rate by 0.75 percentage point.
The rate cut came less than three weeks after the BOK made a rate cut on Oct. 9
in a concerted effort to soothe global financial turmoil, the first reduction
since November 2004.
The move came as South Korea's key stock index on Friday plummeted 10.57 percent
to 938.75, falling below the psychologically important 1,000-point mark for the
first time in 40 months. The Korean currency tumbled to an over 10-year low to
close at 1,422 won to the U.S. dollar on the same day.
Economists say that the emergency rate cut reflected the central bank's all-out
efforts to keep the repercussions of the current global credit crunch from
spilling over to the real economy.
"The larger-than-expected rate cut came as a surprise. The BOK seemed to be
making an effort to swiftly stabilize the markets with an aggressive rate cut,"
said Kim Jae-eun, an economist at Hana Daetoo Securities Co.
The local financial markets have been rattled on concerns that the
recently-announced sweeping measures to shore up the banking and construction
sectors may not be strong enough to restore confidence.
According to the BOK, the South Korean economy grew 0.6 percent in the third
quarter from three months earlier, marking the slowest growth in four years, due
to sluggish domestic demand and lagging export growth.
South Korean households and smaller firms, whose debts are piling up, have been
increasingly cutting their spending amid a slowing economy and the global
financial meltdown.
Asia's fourth-largest economy is expected to lose steam further next year as
exports, which account for about 50 percent of the economy, are likely to slow
down amid a global economic downturn.
Gov. Lee told lawmakers on Thursday that it would be difficult for the local
economy to make 4 percent growth next year although it may see growth in the
3-percent range. He expected that exports would not see double-digit growth in
2009. The Korean economy expanded 5 percent in 2007.
Experts say recent retreats in oil prices seemed to help ease burdens of the BOK
in controlling inflation. Crude oil prices have been heading downward since
peaking at almost $150 per barrel in July. South Korea, the world's fifth-largest
crude buyer, relies entirely on imports for its oil needs.
South Korea's consumer prices climbed 5.1 percent on-year in September, slowing
from a 5.6 percent gain in August, as oil and commodity prices showed signs of
stabilization. They breached the BOK's target range of 2.5-3.5 percent for the
10th straight month.
"If the foreign exchange market stabilizes and the downward path of oil prices
continues, the growth of inflation is expected to ease toward next year," Gov.
Lee said after the rate-setting meeting in early October.
The BOK lowered the interest on its low-rate loans to commercial lenders by 0.75
percentage point to 2.5 percent. The central bank last week raised the cap on
such loans for the first time in seven years in a bid to help smaller firms
weather the current cash crunch.
The BOK also softened restrictions on the use of foreign currency loans to
exporting firms in an effort to help ease their losses from the won's plunge
against the U.S. dollar.
The central bank said it will allow local banks to extend foreign currency loans
to exporters when they settle currency options. Companies will also get an
additional one-year rollover on foreign currency loans borrowed for use as
working capital.
On Oct. 19, the government unveiled a US$130 billion plan aimed at giving
state-guarantees for banks' foreign debts and providing a much-needed liquidity
injection. The package accounts for roughly 15 percent of the country's economy.
It also plans to spend around 9 trillion won ($6.25 billion) to boost the
country's sluggish construction sector and revive the broader economy.
South Korea is also considering cutting additional taxes and increasing its
fiscal spending in a move to bolster the sagging economy.
sooyeon@yna.co.kr
(END)
SEOUL, Oct. 27 (Yonhap) -- South Korea's central bank slashed its key interest rate on Monday by a larger-than-expected 0.75 percentage point in a bid to help ease financial strains facing local banks and companies.
In a blitzkrieg move, Bank of Korea (BOK) Gov. Lee Seong-tae and his six fellow
policymakers lowered the benchmark 7-day repurchase agreement rate to 4.25
percent at an unscheduled policy meeting. It is the first time for the BOK to
trim the rate by 0.75 percentage point.
The rate cut came less than three weeks after the BOK made a rate cut on Oct. 9
in a concerted effort to soothe global financial turmoil, the first reduction
since November 2004.
The move came as South Korea's key stock index on Friday plummeted 10.57 percent
to 938.75, falling below the psychologically important 1,000-point mark for the
first time in 40 months. The Korean currency tumbled to an over 10-year low to
close at 1,422 won to the U.S. dollar on the same day.
Economists say that the emergency rate cut reflected the central bank's all-out
efforts to keep the repercussions of the current global credit crunch from
spilling over to the real economy.
"The larger-than-expected rate cut came as a surprise. The BOK seemed to be
making an effort to swiftly stabilize the markets with an aggressive rate cut,"
said Kim Jae-eun, an economist at Hana Daetoo Securities Co.
The local financial markets have been rattled on concerns that the
recently-announced sweeping measures to shore up the banking and construction
sectors may not be strong enough to restore confidence.
According to the BOK, the South Korean economy grew 0.6 percent in the third
quarter from three months earlier, marking the slowest growth in four years, due
to sluggish domestic demand and lagging export growth.
South Korean households and smaller firms, whose debts are piling up, have been
increasingly cutting their spending amid a slowing economy and the global
financial meltdown.
Asia's fourth-largest economy is expected to lose steam further next year as
exports, which account for about 50 percent of the economy, are likely to slow
down amid a global economic downturn.
Gov. Lee told lawmakers on Thursday that it would be difficult for the local
economy to make 4 percent growth next year although it may see growth in the
3-percent range. He expected that exports would not see double-digit growth in
2009. The Korean economy expanded 5 percent in 2007.
Experts say recent retreats in oil prices seemed to help ease burdens of the BOK
in controlling inflation. Crude oil prices have been heading downward since
peaking at almost $150 per barrel in July. South Korea, the world's fifth-largest
crude buyer, relies entirely on imports for its oil needs.
South Korea's consumer prices climbed 5.1 percent on-year in September, slowing
from a 5.6 percent gain in August, as oil and commodity prices showed signs of
stabilization. They breached the BOK's target range of 2.5-3.5 percent for the
10th straight month.
"If the foreign exchange market stabilizes and the downward path of oil prices
continues, the growth of inflation is expected to ease toward next year," Gov.
Lee said after the rate-setting meeting in early October.
The BOK lowered the interest on its low-rate loans to commercial lenders by 0.75
percentage point to 2.5 percent. The central bank last week raised the cap on
such loans for the first time in seven years in a bid to help smaller firms
weather the current cash crunch.
The BOK also softened restrictions on the use of foreign currency loans to
exporting firms in an effort to help ease their losses from the won's plunge
against the U.S. dollar.
The central bank said it will allow local banks to extend foreign currency loans
to exporters when they settle currency options. Companies will also get an
additional one-year rollover on foreign currency loans borrowed for use as
working capital.
On Oct. 19, the government unveiled a US$130 billion plan aimed at giving
state-guarantees for banks' foreign debts and providing a much-needed liquidity
injection. The package accounts for roughly 15 percent of the country's economy.
It also plans to spend around 9 trillion won ($6.25 billion) to boost the
country's sluggish construction sector and revive the broader economy.
South Korea is also considering cutting additional taxes and increasing its
fiscal spending in a move to bolster the sagging economy.
sooyeon@yna.co.kr
(END)
