Korean Monetary Policy Left Unchanged

October 13, 2011

South Korea’s seven-day repo rate has been at 3.25% for the past four months following two hikes in 2010 in July and November and three similar moves in the first half of 2011 in January, March, and June.  Three cuts between August 2008 and February 2009 had slashed the benchmark from 5.25% to 2.0%.  Inflation is marginally above the 3-4% target range but easing with a total and core rate of 4.3% and 3.9%.  Stubbornly high expected inflation continues to command the attention of monetary officials.  Real GDP climbed 3.4% between 2Q10 and 2Q11.  Export growth has been robust, but today’s central bank statement stressed mounting external risks “due mostly to the likelihood of the sovereign debt problems in Europe spreading, and to the possibilities of the slumps in major country economies and the unrest in international financial markets continuing.”  Domestic demand is trend upward but only at a modest pace.

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



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