Bank of Korea Base Rate Holds at 2.0%

October 9, 2009

No change was made in the key interest rate benchmark, the same result as in the seven previous monthly policy meetings.  Previously from a 5.25% peak, there had been two cut in October 2008 totaling 100 basis points followed by a 175-bp reduction in December and a 50 bp cut in February.  Although CPI inflation of 2.2% in the year to September remains contained, recovery is proceeding rather briskly with GDP jumping 11% at an annualized rate between 1Q09 and 2Q09.  A statement published on the Bank of Korea website speaks of continuing economic uncertainties, rising property prices, a consolidation of stock prices after a sharp rebound, and slower mortgage lending, but it doesn’t mention one of the most important developments, a worrisome very sharp advance in the won to some 19% above its year-ago dollar value and around 33% stronger than such was in early March.  Officials promise to “maintain an accommodative policy stance for the time being.”

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


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