A More Dovish Statement from the Bank of Korea
November 11, 2011
The seven-day repo rate was left at 3.25% for the fifth time in a row. Five previous rate increases of 25 basis points each were implemented in July and November of 2010 and January, March and June of this year. During the current policy pause, Bank of Korea officials had maintained a tightening bias, but the following key passage from the Bank’s October statement stepped slightly away from that priority.
Looking ahead, the Committee, while closely monitoring financial and economic risk factors both at home and abroad, will conduct monetary policy with a greater emphasis on ensuring that the basis for price stability is firmly anchored while the economy continues its sound growth.
was tweaked in the new statement to read instead
Looking ahead, the Committee, while closely monitoring financial and economic risk factors both at home and abroad, will conduct monetary policy so as to firmly anchor the basis for price stability amid continuing sound growth of the economy.
This subtle change in language reflects the view “that downside risks to growth are high, due mostly to the sovereign debt crisis in Europe and to the possibilities of the slumps in major country economies and the unrest in international financial markets continuing.” Headline and core inflation in South Korea stood at 3.9% and 3.7% last month. Real GDP expanded 3.4% between the third quarters of 2010 and 2011.
In a six-month span at the start of the Great Recession, the benchmark interest rate was slashed in three moves from 5.25% prior to August 2008 to a cyclical low of 2.0%. Today’s rate decision to leave the 3.25% rate unchanged was anticipated.
Copyright 2011, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Korea
ShareThis
