Bank of Korea Retains 1.5% Seven-Day Repo Rate

September 11, 2015

South Korean monetary policy has an accommodative bias.  Four 25-basis point rate cuts since August 2014 and most recently in June of this year have lowered the benchmark to a record low of 1.5%.  A released statement after this month’s policy meeting is dovish. 

  • South Korean growth was scant and disappointing in the first half of this year.  “The Board forecasts that the domestic economy will show a trend of recovery going forward, but in view of external economic conditions judges the uncertainties surrounding the growth path to have increased.”
  • Officials forecast “that inflation will continue at a low level, due mainly to the effects of the low oil prices.”  The 12-month increase of consumer prices is just 0.7%.
  • Regarding forward guidance, a pledge is made to watch developments that could persuade the central bank to ease again and which in any case point to no tightening in the near term.  The Board “will closely monitor the trend of increase in household debt and external risk factors such as any shift in the US Federal Reserve‚Äôs monetary policy and the financial instabilities in emerging market countries including China, as well as the trends of capital flows.”

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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