2.5% Bank of Korea 7-Day Base Rate Retained

February 13, 2014

South Korean monetary policy has been steady for the past nine months.  The last three central bank interest rate changes were all cuts of 25 basis points administered in July and October of 2012 and, most recently, May of 2013.  A statement released after this year’s first monetary policy meeting reaffirmed the views of continuing domestic economic recovery, a gradual narrowing of South Korea’s output gap, low sub-target CPI inflation “for the time being,” stable commodity prices, and an eventual rise of the CPI pace, which is presently at 1.1% versus a target range of 1.5-3.5%. Some of the won’s prior depreciation has been reversed.  Monetary policy aims to balance the medium-term inflation mandate with support for growth when that doesn’t jeopardize price stability.  Prior to the aforementioned three rate cuts in 2012 and 2013, five similarly sized increases were implemented between June 2011 and June 2011.

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