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BOK hints at no rate change soon
Writer : Sender
Nov 13, 2009
Korea's central bank yesterday kept the interest rate unchanged for the ninth month in a row, saying that it was focused on safeguarding economic recovery.
The Bank of Korea's Monetary Policy Committee left the seven-day repurchase rate at a record-low 2 percent. It had slashed the rate by 3.25 percentage points between October last year and February, in a bid to fight a sharp economic downturn.
"The recovery trend of real economic activities has recently become more evident," the BOK said in a press statement. "There still remains, however, uncertainty as to the economic growth path," it said.
"The current stance of (the Monetary Policy Committee) is to keep the status quo on the interest rate, while watching out for a clearer sign of economic revival," BOK Governor Lee told reporters after the committee's monthly review of the interest rate.
Korea's economy registered surprisingly high growth rates in past two quarters of 2009, which prompted some experts to predict that the country may become one of the earliest to start unwinding emergency interest rate cuts.
Asia's fourth-largest economy expanded 2.9 percent in three months through September, from three months earlier when it grew 2.6 percent.
"In the fourth quarter, the economy will continue to post a positive growth rate, although the number will likely be smaller than those of the previous two quarters," Lee said.
"The effect of the government's economic stimulus measures will weaken significantly in 2010, compared to this year. We will take that into account when making monetary policy decisions," he added.
The government has said repeatedly that it is too early to start a so-called exit from emergency economic measures taken to protect the economy from unprecedented synchronized recessions in advanced economies.
Finance Minister Yoon Jeung-hyun and other officials have publicly expressed their opinions that a rate hike is premature, saying the economy, despite recent improvements, is still fragile.
"The main reason for an early tightening move would have been to cool activity in the property market, but the bank noted (in the accompanying statement) that the 'upward trend in real estate prices appears to have faltered,'" said Alaistair Chan, a Sydney-based economist at Moody's Economy.com
With the BOK saying it is expecting low inflationary pressure for some time, the timing of a rate hike appears to have been pushed back by a few months, he said.
He predicted a hike in the first quarter of 2010 at the earliest.
The Samsung Economic Research Institute also said the central bank would remain at a status quo for the timing being and may consider a hike in the first half of next year.
"Despite the pressure (on the BOK) to start raising the rate, the BOK must remain cautious about its decision in order to stave off the risk of a double-dip recession," the institute said in a report.
(Source: The Korea Herald)
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