Bank of Korea Releases Dovish Statement

January 11, 2013

The Bank of Korea became the fifth central bank in two days to leave its stance unchanged.  The seven-day Korean repo rate was left at 2.75% for a third straight time following this month’s meeting of the Monetary Policy Committee.  The statement released by authorities leaves the door open to another rate cut, however, by presenting a dimmer outlook for growth and inflation and declaring

  • That global growth risks continue to be stacked up on the downside,
  • That Korean growth is weak,
  • That a negative output gap persisting for a “considerable” time longer will further sap any demand-side pressure on inflation, and
  • That inflation, which is at 1.4% overall (1.2% core) and thus below the 2-4% target range, will remain low “for the time being.”

Rate cuts of 25 basis points last July and October followed a series of five such hikes administered in June 2010, November 2010, January 2011, March 2011, and June 2011.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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