No Rate Change from the Bank of Korea this Month

August 9, 2012

The seven-day repo rate had been cut at the July meeting for the first time since February 2009, but the 3.0% level was retained after today’s Monetary Policy Committee met.  A released statement observes a weaker global environment and slower growth as well in South Korea.  The output gap between potential and actual GDP will take a “considerable time” to close and promote inflation staying at “a low level for the time being.”  Consumer prices rose just 1.5% in the year to July, which was a 12 year 2 month low.  The statement doesn’t give explicit guidance on future policy changes, but the statement’s tone appears to skew the direction of the next move downward.

From October 2008 to February 2009, the benchmark interest rate was cut to 2.0% from 5.25%.  Five subsequent 25-bp hikes were made July 2010, November 2010, January 2011, March 2011, and June 2011.

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



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