Bank of Korea

February 17, 2015

The Bank of Korea’s seven-day repo rate will remain at 2.0%, its level since a rate cut of 25 basis points last October.  There were also cuts of that size in November 2012, May 2013, and August 2014.  Korean economic growth slowed sharply to 0.4% last quarter and CPI inflation of 0.8% lies below 1.0%.  Although a released statement expects growth to remain modest and projects “that the negative output gap will persist for a considerable time,” the statement also stresses uncertainties surrounding the outlook such as “the possibility of changes in the monetary policies of major countries, the weakening of economic growth in emerging market countries, geopolitical risks, and the uncertainties over the restructuring of Greek debt.”  All in all, officials felt most comfortable taking a wait and see approach now.  Hopefully, time will clarify some of these uncertainties and determine whether it is appropriate and safe to cut rates any further.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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