ID :
54656
Thu, 04/09/2009 - 17:32
Auther :
Shortlink :
https://www.oananews.org//node/54656
The shortlink copeid
(2nd LD) Bank of Korea freezes key rate at 2 pct
(ATTN: RECASTS paras 2-5,15-16,18 with more details and remarks by BOK Gov.; UPDATES
with economists' remarks in last 4 paras)
By Kim Soo-yeon
SEOUL, April 9 (Yonhap) -- South Korea's central bank froze its key interest rate
for the second straight month on Thursday, saying that a sharp fall in economic
activity has moderated.
But despite some signs of improvements, Bank of Korea (BOK) Gov. Lee Seong-tae
remained cautious that the Korean economy may not hit bottom in the first half of
this year, saying that there is room for possible rate cuts.
In a monthly policy meeting, the BOK left the benchmark seven-day repo rate
unchanged at a record low of 2 percent, as widely expected. Between October and
February, the BOK had made six consecutive rate cuts totaling 3.25 percentage
points.
The central bank said it will maintain an easing stance for the time being and
focus its future monetary policy on heading off a severe economic slowdown and
stabilizing the financial markets.
"A sharp contraction in the Korean economy seen late last year has been
moderating," Gov. Lee told a press conference after the meeting. "But
difficulties facing the local economy will continue for the time being... and a
chance for additional rate cuts is not completely closed."
The rate freeze comes amid rising optimism that Asia's fourth-largest economy
might be bottoming out.
In February, the country's industrial output sank 10.3 percent from a year
earlier, easing from a 25.5 percent on-year fall the previous month. Production
gained 6.8 percent on-month in February after posting a 1.6 percent advance in
January.
South Korea's trade surplus reached a record US$4.6 billion in March as imports
declined faster than exports, prompting the local currency to gain almost 11
percent to the greenback last month.
Analysts said the eased growth of inflation might give the BOK leeway to stand
pat on the rate this month. The country's consumer prices rose 3.9 percent last
month from a year earlier, moderating from a 4.1 percent on-year gain in
February.
But despite some signs of improvement, many experts warn it is too early to say
the economy is entering a full-blown recovery phase, given the uncertainty
surrounding the global economic slump and sluggish job markets.
The Korean economy contracted 5.1 percent in the fourth quarter of last year from
three months earlier, the worst performance in more than a decade, buffeted by
tumbling exports and weak domestic demand. Asia's fourth-largest economy is
widely expected to log negative growth in 2009 with the government predicting a 2
percent fall.
The country's jobless rate jumped to a four-year high of 3.9 percent in February
with over 140,000 jobs eliminated from payrolls compared with a year earlier. The
job loss was the steepest since September 2003.
Last month, the government unveiled a 28.9 trillion won (US$21.3 billion) extra
budget, the biggest ever, aimed at creating more jobs and jump-starting the
sputtering economy. Of the total, it set aside 17.7 trillion won for fiscal
spending.
"If necessary, the BOK is ready to take proper actions after assessing the market
situation," Lee said, when asked about a possibility that the central bank would
buy government bonds.
The supply of treasury bonds is expected to increase as the government plans to
sell more debt to finance its fiscal spending. Market players hope that the BOK
will underwrite or purchase government debts from the secondary market to cushion
a possible jump in borrowing costs.
Analysts said some improvements in recent economic data do not warrant that the
Korean economy is recovering.
"Although the financial markets are stabilizing, it seems that the real economy
is not yet bottoming out," said Jeon Hyo-chan, an economist at Samsung Economic
Research Institute. "It is still too early for the BOK to end its rate-cutting
steps."
But some experts said the central bank's monetary easing cycle has effectively
been wrapped up.
"Unless unexpected economic jitters emerge, I think the BOK will keep the rate on
hold throughout the year," said Kim Jae-eun, an economist at Hana Daetoo
Securities Co. "As the economy may see some recovery starting in the second half,
the BOK will likely wait and see."
sooyeon@yna.co.kr
(END)
with economists' remarks in last 4 paras)
By Kim Soo-yeon
SEOUL, April 9 (Yonhap) -- South Korea's central bank froze its key interest rate
for the second straight month on Thursday, saying that a sharp fall in economic
activity has moderated.
But despite some signs of improvements, Bank of Korea (BOK) Gov. Lee Seong-tae
remained cautious that the Korean economy may not hit bottom in the first half of
this year, saying that there is room for possible rate cuts.
In a monthly policy meeting, the BOK left the benchmark seven-day repo rate
unchanged at a record low of 2 percent, as widely expected. Between October and
February, the BOK had made six consecutive rate cuts totaling 3.25 percentage
points.
The central bank said it will maintain an easing stance for the time being and
focus its future monetary policy on heading off a severe economic slowdown and
stabilizing the financial markets.
"A sharp contraction in the Korean economy seen late last year has been
moderating," Gov. Lee told a press conference after the meeting. "But
difficulties facing the local economy will continue for the time being... and a
chance for additional rate cuts is not completely closed."
The rate freeze comes amid rising optimism that Asia's fourth-largest economy
might be bottoming out.
In February, the country's industrial output sank 10.3 percent from a year
earlier, easing from a 25.5 percent on-year fall the previous month. Production
gained 6.8 percent on-month in February after posting a 1.6 percent advance in
January.
South Korea's trade surplus reached a record US$4.6 billion in March as imports
declined faster than exports, prompting the local currency to gain almost 11
percent to the greenback last month.
Analysts said the eased growth of inflation might give the BOK leeway to stand
pat on the rate this month. The country's consumer prices rose 3.9 percent last
month from a year earlier, moderating from a 4.1 percent on-year gain in
February.
But despite some signs of improvement, many experts warn it is too early to say
the economy is entering a full-blown recovery phase, given the uncertainty
surrounding the global economic slump and sluggish job markets.
The Korean economy contracted 5.1 percent in the fourth quarter of last year from
three months earlier, the worst performance in more than a decade, buffeted by
tumbling exports and weak domestic demand. Asia's fourth-largest economy is
widely expected to log negative growth in 2009 with the government predicting a 2
percent fall.
The country's jobless rate jumped to a four-year high of 3.9 percent in February
with over 140,000 jobs eliminated from payrolls compared with a year earlier. The
job loss was the steepest since September 2003.
Last month, the government unveiled a 28.9 trillion won (US$21.3 billion) extra
budget, the biggest ever, aimed at creating more jobs and jump-starting the
sputtering economy. Of the total, it set aside 17.7 trillion won for fiscal
spending.
"If necessary, the BOK is ready to take proper actions after assessing the market
situation," Lee said, when asked about a possibility that the central bank would
buy government bonds.
The supply of treasury bonds is expected to increase as the government plans to
sell more debt to finance its fiscal spending. Market players hope that the BOK
will underwrite or purchase government debts from the secondary market to cushion
a possible jump in borrowing costs.
Analysts said some improvements in recent economic data do not warrant that the
Korean economy is recovering.
"Although the financial markets are stabilizing, it seems that the real economy
is not yet bottoming out," said Jeon Hyo-chan, an economist at Samsung Economic
Research Institute. "It is still too early for the BOK to end its rate-cutting
steps."
But some experts said the central bank's monetary easing cycle has effectively
been wrapped up.
"Unless unexpected economic jitters emerge, I think the BOK will keep the rate on
hold throughout the year," said Kim Jae-eun, an economist at Hana Daetoo
Securities Co. "As the economy may see some recovery starting in the second half,
the BOK will likely wait and see."
sooyeon@yna.co.kr
(END)
