South Korean Monetary Policy Unchanged This Month

April 12, 2011

The Bank of Korea’s seven-day repo rate was kept at 3.0% as most pundits expected.  Starting last July, such had previously been raised four times by 25 basis points each, most recently at this year’s March meeting.  A statement on the central bank website warns that policy in the future will put greater stress on securing price stability but identifies three risks in justifying the pause: Japan’s earthquake, the European debt crisis, and unrest in the Middle East and North Africa, which has driven up commodity prices. A 4.7% rise of consumer prices between March 2010 and March 2011 constituted a 29-month high and exceeds the 3-4% target range.  Core consumer prices went up 0.5% and 3.3% on year last month.  Economic growth of 4-5% has been carried by buoyant exports. Officials have countered upward pressure on the won, but they remain intent of continuing the process of rate normalization begun in the middle of last year.  In three large moves, the key repo rate was reduced from 5.25% prior to August 2008 to a low of 2.0% by February 2009.

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



Comments are closed.