Bank of Korea: No Rate Hike This Month

February 12, 2011

In January, officials at the Bank of Korea raised their Base Rate by 25 basis points when analysts weren’t expecting a move, and on February 11 they kept the key rate at 2.75% when the market had been looking for a fourth increase of 25 bps.  Full transparency doesn’t command to extreme high priority that it does elsewhere, but Korean monetary authorities have been consistent in implying more tightening ahead.  The first two increases were implemented last July and November.  A record low 2.0% existed from February 2009 until July 2010.  Previously, the base rate had been reduced 325 basis points in three steps between August 2008 and February of 2009. 

A new statement this month projects good growth in domestic activity in spite of external risks and “expects high inflation expectations to continue and inflationary pressures to also persist as the economic upswing continues.”  Officials also observe that long-term interest rates have risen “significantly” since the January rate advance.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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