Korean Monetary Policy Still on Hold

February 9, 2012

Five 25-basis point hikes in the Bank of Korea’s seven-day repo rate were done previously in July 2010, November 2010, January 2011, March 2011 and June 10, 2011.  Since then, the benchmark has been kept at 3.25%, 200 basis points shy of its pre-August 2008 high.  A statement from officials observes low domestic demand and slowing export demand but forecasts a gradual eventual incline of growth toward the long-term trend.  CPI inflation slowed to 3.4% in January versus a 2-4% target band, but inflation expectations are more elevated than desired and being watched. Officials want to steer inflation to the center of the target band.  The won has been performing better.  Today’s decision to keep the status quo was unanimous, and officials concede that growth risks are skewed to the downside.  It seems that policy will most likely stay on pause in the short run, but additional rate hikes appear probable down the road.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.