Bank of Korea Policy Unchanged

March 11, 2010

South Korea’s Monetary Policy Committee kept its key interest rate at 2.0% as expected.  Cuts totaling 100 basis points in August 2008, 175 bps in December 2008 and 50 bps in February 2009 slashed the rate from 5.25% to 2.0%, where it has been ever since.  A statement on the Bank of Korea website retains the view that the policy rate is likely to stay at 2% “for the time being” in order to sustain recovery.  Real GDP only expanded 0.7% annualized last quarter, well below the 3Q pace.  Meanwhile, a spike in inflation has begun to recede as officials predicted, and they anticipate stable prices this year. At 2.0%, Korea’s key interest rate lies 125 basis points below the previous cyclical low of 3.25% from November 2004 until October 2005.

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



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