Korean Base Rate Stays at 2.0% as Expected

February 11, 2010

The Bank of Korea again pledged to maintain its accommodative monetary policy stance “for the time being.”  An acceleration of CPI inflation to 3.1% in January from 2.4% in November is not expected to persist, and while GDP continues to recover, being 6% higher in 4Q09 than a year earlier, officials said the possibility of European debt crises creates uncertainty in the forecast.  The last rate cut by the Bank of Korea was made exactly one year ago.  That final drop of 50 basis points followed reductions of 175 bps in December 2008 and 100 bps in two moves during October 2008.  The peak base rate level after a 25-bp rate hike in August 2008 had been 5.25%.  The prior cyclical low from November 2004 to October 2005 had been at 3.25%.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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