(LEAD) BOK says to gradually adjust degree of easing policy

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SEOUL, Jan. 7 (Yonhap) -- South Korea's central bank said Thursday it will
maintain its accommodative policy for the time being to support economic
recovery, but plans to gradually adjust the degree of the easing stance this
year.

"The Bank of Korea (BOK) plans to manage the rate policy in a way to help boost
the economic recovery for the time being," the central bank said in its 2010
monetary policy report.
"But more attention will be given to potential imbalances the extended easing
policy could bring to the economy. The bank plans to adjust the accommodative
policy at an appropriate pace and by a proper margin by taking into account
financial and economic conditions."
The report came one day before the BOK holds its monthly rate-setting meeting
where it is widely expected to freeze its key interest rate at a record low of 2
percent for the 11th straight month. The bank cut the base rate by a total of
3.25 percentage points between October 2008 and February in an effort to put the
brakes on a sharp economic freefall.
The report is in line with BOK Gov. Lee Seong-tae's New Year message. He said
that there is the need to underpin growth momentum of the private sector due to
uncertainty about growth for the time being, but the bank plans to adjust the
rate policy appropriately when needed.
The South Korean economy is recovering at a faster-than-expected pace, sparking
debate over when and how the government and the BOK will roll back emergency
steps taken to combat the global financial turmoil and its subsequent economic
downturn.
The government predicted in December that Asia's fourth-largest economy will grow
5 percent this year after an estimated 0.2 percent expansion in 2009.
The BOK said it will closely monitor asset prices and make efforts to prevent
consumer inflation from highly diverting from its median inflation target set for
the 2010 and 2012 period.
The central bank widened its 2010-2012 inflation target band by setting the
median consumer price target at 3 percent with a margin of plus or minus 1
percentage point.
The move is widely seen to provide more leeway for the bank to manage its
monetary policy flexibly and better cope with economic uncertainty.
The BOK said in a report that it will continue to soak up liquidity which sharply
increased in its response to stem the impacts of the global financial meltdown.
As part of such moves, the bank plans to gradually lower the cap on low-rate
loans it offers to small businesses by taking into account the financial market
conditions.
sooyeon@yna.co.kr
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