ID :
98822
Fri, 01/08/2010 - 11:13
Auther :
Shortlink :
https://www.oananews.org//node/98822
The shortlink copeid
Bank of Korea freezes key rate for 11th month
By Kim Soo-yeon
SEOUL, Jan. 8 (Yonhap) -- South Korea's central bank froze its key interest rate for the 11th straight month on Friday on uncertainty over the sustainability of an economic recovery.
In a monthly policy meeting, the Bank of Korea (BOK) froze the benchmark
seven-day repo rate, dubbed the base rate, at a record low of 2 percent, as
widely expected. It cut the rate by a total of 3.25 percentage points between
October 2008 and February in a bid to bolster the slumping economy.
"The Korean economy is expected to maintain its positive growth trends down the
road on the back of improving global economic environment and increased consumer
and business confidence. But there is a considerable degree of uncertainty over
the growth path," the BOK said in a statement.
The bank said that it will keep the accommodative policy stance for the time
being in order to help support the economic recovery.
Asia's fourth-largest economy chalked up a surprise 3.2 percent gain in the third
quarter from three months earlier on improving domestic demand and brisk exports.
The government predicted in December that the Korean economy will grow 5 percent
this year after an estimated 0.2 percent expansion in 2009.
A set of economic data is underpinning optimism that the country will see a fast
economic recovery, heightening the debate over when the BOK will shift into a
tightening stance.
The bank reiterated in its 2010 monetary policy report that it will maintain its
easing stance for the time being to help sustain the economic recovery, but plans
to gradually adjust the degree of the easing stance this year by taking into
account the financial and economic situations.
"The private sector has yet to make a sustainable recovery and risks continue to
linger as shown by Kumho Asiana Group's liquidity woes," said Shin Dong-su, an
economist at NH Investment & Securities Co.
Economists say that given signs of an economic rebound, the BOK may raise
borrowing costs as early as February.
"There is a need to raise the rate in the first quarter, given the side effects
that the record low rate could entail," said Kim Yoon-ki, an economist at Daishin
Economic Research Institute.
But others say the timing of a potential rate hike may be pushed back because of
patches of economic uncertainty and government pressure.
South Korea's vice finance minister will regularly attend the rate-setting
committee of the BOK starting this year, beginning with Friday's meeting, in
order to voice the government's opinion on the overall monetary policy direction
and economic management.
The move comes as the government and the central bank have been at odds with each
other over when and how to roll back emergency steps taken to combat the global
economic crisis. The government has repeated that it will maintain a
"expansionary" policy for the time being as the economic recovery has yet to gain
a solid footing.
The BOK cut the key rate by a total of 3.25 percentage points between October
2008 and February 2009 in an effort to put the brakes on a sharp economic
freefall.
sooyeon@yna.co.kr
(END)
SEOUL, Jan. 8 (Yonhap) -- South Korea's central bank froze its key interest rate for the 11th straight month on Friday on uncertainty over the sustainability of an economic recovery.
In a monthly policy meeting, the Bank of Korea (BOK) froze the benchmark
seven-day repo rate, dubbed the base rate, at a record low of 2 percent, as
widely expected. It cut the rate by a total of 3.25 percentage points between
October 2008 and February in a bid to bolster the slumping economy.
"The Korean economy is expected to maintain its positive growth trends down the
road on the back of improving global economic environment and increased consumer
and business confidence. But there is a considerable degree of uncertainty over
the growth path," the BOK said in a statement.
The bank said that it will keep the accommodative policy stance for the time
being in order to help support the economic recovery.
Asia's fourth-largest economy chalked up a surprise 3.2 percent gain in the third
quarter from three months earlier on improving domestic demand and brisk exports.
The government predicted in December that the Korean economy will grow 5 percent
this year after an estimated 0.2 percent expansion in 2009.
A set of economic data is underpinning optimism that the country will see a fast
economic recovery, heightening the debate over when the BOK will shift into a
tightening stance.
The bank reiterated in its 2010 monetary policy report that it will maintain its
easing stance for the time being to help sustain the economic recovery, but plans
to gradually adjust the degree of the easing stance this year by taking into
account the financial and economic situations.
"The private sector has yet to make a sustainable recovery and risks continue to
linger as shown by Kumho Asiana Group's liquidity woes," said Shin Dong-su, an
economist at NH Investment & Securities Co.
Economists say that given signs of an economic rebound, the BOK may raise
borrowing costs as early as February.
"There is a need to raise the rate in the first quarter, given the side effects
that the record low rate could entail," said Kim Yoon-ki, an economist at Daishin
Economic Research Institute.
But others say the timing of a potential rate hike may be pushed back because of
patches of economic uncertainty and government pressure.
South Korea's vice finance minister will regularly attend the rate-setting
committee of the BOK starting this year, beginning with Friday's meeting, in
order to voice the government's opinion on the overall monetary policy direction
and economic management.
The move comes as the government and the central bank have been at odds with each
other over when and how to roll back emergency steps taken to combat the global
economic crisis. The government has repeated that it will maintain a
"expansionary" policy for the time being as the economic recovery has yet to gain
a solid footing.
The BOK cut the key rate by a total of 3.25 percentage points between October
2008 and February 2009 in an effort to put the brakes on a sharp economic
freefall.
sooyeon@yna.co.kr
(END)
