Bank of Korea: No Change Again in Key Interest Rate

June 8, 2012

The last change in the South Korea’s seven-day repo rate came one year ago and culminated a sequence of five 25-basis point increases made in July 2010, November 2010, January 2011, March 2011 and June 2011.  Over that period, the key rate climbed from 2.0%, the Great Recession low, to 3.25%, its current and continuing level after officials again decided today not to change policy.  A statement declares that “downside risks to growth are becoming larger, due chiefly to the international financial market unrest stemming from euro area risks and to the possibilities of economic slumps in major countries.”  This is true in South Korea as well as other emerging and advanced economies.  Bank of Korea officials project weak continuing growth in their economy.  Core inflation dipped in the latest reported month, but the authorities “recognize the presence of potentially destabilizing factors, such as pressures to hike public utility fees and the ongoing high inflation expectations.”  The statement also mentions that the won has fallen greatly against the dollar.  The statement talks of a policy need to balance priorities of supporting growth and steering inflation to the middle of the target range.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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