Bank of Korea Passes

March 12, 2009

South Korean monetary policy had been eased aggressively, with six rate cuts totaling 325 basis points and spaced between October 9th and February 12th.  Opinion was divided on the likelihood of another reduction today, and officials decided to adopt a wait-and-see approach instead to monitor a little better the impact of the stimulus provided so far.  Monetary officials released a statement that

  • Identifies increasing downside growth risk,
  • Observes a recent uptick of inflation caused by higher import prices and won depreciation,
  • Projects renewed ebbing inflation as negative demand-pull pressures dominate pressures related to the won, and
  • Proclaims its two main priorities to be promoting growth and stabilizing the financial markets.

Bottom line is that 2.0% is unlikely to be the cyclical floor of the central bank’s benchmark rate.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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