Bank of Korea: No Rate Change Accompanied by a Dovish Statement

December 13, 2012

South Korea’s seven-day repo rate had crested at 3.25% from June 2011 until a 25-basis point in July 2012 that was followed by a second such cut to 2.75% in October.  2.75% will continue to be the rate level for the coming month following the latest monthly meeting of the Monetary Policy Committee, but the released statement suggests that more monetary relief could lay ahead.  Growth is called “weak,” and the negative output gap is projected to “persist for a considerable time,” which will depress demand-side pressures and keep inflation “low for the time being.”  Headline and core CPI inflation in November of 1.6% and 1.3% were lower than October readings and, more importantly, well below the central bank’s 2-4% target range.

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

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