Bank of Korea Retained 2.0% Seven-Day Repo Rate As Expected

August 11, 2009

South Korean monetary officials left monetary policy settings where such have been since a 50-basis point rate cut last February 12th. A statement from Bank of Korea officials framed the decision process as whether to keep the status quo or begin reabsorbing stimulus, suggesting that 2.0% is the cyclical floor.  That’s what analysts have been assuming.  From a peak of 5.25% between August 7 and October 9 of last year, the 7-day repo rate was cut by 25 basis points initially, another 75 bps on October 27, 175 bps on December 4 and 50 basis points on February 12 in the only change made so far in 2009.  Today’s statement writes about a further moderation of the slump in both domestic demand and exports, decelerating CPI inflation, a stronger won, and upwardly trending real estate, equity prices, market interest rates and mortgage lending.  But concerns persist “about the credit risk and shortermism of market funds.”  The currently accommodative monetary stance will be maintained therefore “for the time being.”

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


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