Monetary Policy on Hold in South Korea

October 10, 2013

A statement released by the Bank of Korea defends the low 2.5% 7-day repo rate.  Officials cut the rate by 25 basis points each in July 2012, October 2012 and, most recently, May 2013.  Growth is strengthening but remains low, with GDP projected to expand less than 3% in 2013 and less than 4% next year.  Inflation of 0.8% in the year to August lies far below the 1.5-3.5% target.  “The Monetary Policy Committee expects that the domestic economy will maintain a negative output gap for a considerable time going forward, although it forecasts that the gap will narrow. …Despite increases in some public utility fees, inflation will remain low for the time being.”   Analysts aren’t anticipating a rate hike before mid-2014.

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



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