South Korean 2.0% Base Rate Retained as Expected

April 9, 2010

After cutting its key monetary policy rate by 100 basis points in August 2008, 175 bps in December 2008 and 50 bps in February 2009, the Bank of Korea will continue to run that very accommodative rate level.  The economy is recovering, thanks to buoyant exports and steadily increasing consumption and investment.  GDP was 6.0% higher in 4Q09 than in 4Q08.  Financial markets are better, too.  However, global economic prospects remain shrouded in uncertainty, and inflation settled back to an even more acceptable 2.5% last month from 2.7% in February.  Won strength, up over 20% from a year ago against the dollar, is an inflation depressant but also a source of concern regarding growth.  Hence today’s statement from the Bank of Korea reiterates the commitment to keep an “accommodative monetary policy for the time being” to support economic recovery.

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



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