Bank of Korea
July 9, 2010
Bowing to the reality of a strong domestic recovery — real GDP grew in the first quarter by over 8% both from 4Q09 annualized and from 1Q09 — the Bank of Korea finally implemented a rate increase of 25 basis points in its seven-day repo rate to 2.25%. However, in deference to slack property prices, volatile equity markets, and risks posed by Europe’s sovereign debt problems, a statement posted on the Bank of Korea web site promised to maintain a growth-supportive accommodative policy stance. CPI inflation of 2.6% in June lies comfortably between 2% and 3%. However, PPI inflation is at 4.6%, and demand-pull price pressures are forecast to keep building. Exports are 32.4% greater than a year ago, labor market conditions have improved, and consumption and investment are rising steadily. Today’s action had been predicted by only a minority of forecasters and gave the won a lift. The statement from the Bank of Korea gave no clue about the timing of subsequent rate adjustments.
Copyright Larry Greenberg 2010. All rights reserved. No secondary distribution without express permission.
Tags: Korea
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