One policymaker opposes April rate freeze: minutes

SEOUL, May 26 (Yonhap) -- One policymaker at the Bank of Korea (BOK) voted
against a freeze on its key interest rate in April, voicing the need for a cut to
bolster the slumping economy, according to the central bank's minutes released
Tuesday.

In a rate-setting meeting on April 9, the BOK's monetary policy committee decided
to leave the benchmark seven-day repo rate unchanged at a record low of 2 percent
for the second straight month in a bid to leave room to brace for a deeper
economic downturn. It made six consecutive rate cuts totaling 3.25 percentage
points between October and February.
But according to the minutes, only one member, Kang Myung-hun, argued that the
BOK needs to cut the rate by 0.25 percentage point to 1.75 percent.
"As the recovery of the global financial system is not likely to take place
swiftly, it would be difficult for the Korean economy to regain its growth
momentum in the short term," Kang was quoted as saying.
"If the rate is frozen for two months in a row, market players might wrongfully
understand it as a signal that the monetary easing steps are wrapping up."
In May, the BOK froze the key rate for the third straight month, saying that a
sharp decline in economic activity has markedly moderated.
The South Korean economy grew 0.1 percent in the first quarter from three months
earlier mainly due to the government's fiscal spending. Asia's fourth-largest
economy shrank 5.1 percent in the fourth quarter of last year.
The BOK predicted that the local economy will fall 2.4 percent this year, the
worst performance in more than a decade. The economy may hit bottom in the second
or third quarter, but it is expected to recover very slowly due to uncertainty
about the global recession, it added. The next review is slated for June 11.
sooyeon@yna.co.kr
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