S. Korea set to expand inflation target band

(ATTN: RECASTS headline, lead; UPDATES with more details in paras 2-4, 6)
SEOUL, Nov. 24 (Yonhap) -- South Korea plans to widen its medium-term inflation
target band to allow more flexibility in monetary policy and better deal with
economic uncertainties, government and financial sources said Tuesday.
After consultation with the Bank of Korea (BOK), the government decided to set
the country's 2010-2012 inflation target between 2-4 percent, compared with the
current band of 2.5-3.5 percent, they said.
The range expansion gives policymakers greater leeway in implementing monetary
policies to cope with growing economic uncertainties, and may be an indication
that Seoul wants to maintain its expansionary stance to revive the economy in the
coming years, sources said.
"If the inflation control range is widened, the central bank and the government
will feel less pressure if they opt to raise key interest rates, which have been
frozen at 2 percent since February," a BOK insider said.
The wider margin also reflects concerns related to possible hikes in the prices
of raw materials and energy resources, and large amounts of liquidity in the
global market resulting from government implementation of expansionist policy
measures to fuel business investment, production and consumer spending.
A BOK official said the central bank's policy-setting Monetary Policy Committee
is scheduled to make a decision on Thursday on consumer price targets.
Kwon Soon-woo, a research fellow at the Samsung Economic Research Institute, said
there have been steady calls to broaden the country's inflation control target to
2.0-4.0 percent from the 2.5-3.5 percent range at present.
yonngong@yna.co.kr
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