Bank of Korea

October 13, 2016

Policymakers at the Bank of Korea did not raise their one-week repo rate of 1.25%, a record low, in spite of a tripling of CPI inflation to 1.2% in September and a projection that positive growth will continue in the vicinity of 3%. In a statement released after the October policy meeting, officials stressed the persistence of high uncertainty surrounding the growth outlook. Household debt soared a bit over 10% between mid-2015 and mid-2016, and the cancellation of production on Samsung’s highest line of smart phones will no doubt deliver a hit, the magnitude of which cannot as yet be determined. September’s accelerated inflation reflected higher agricultural prices, and officials do not anticipate more than a gradual upturn. Inflation, meanwhile, remains below the 2% target.

The decision to leave the central bank interest rate unchanged was unanimous. The rate’s last change was a cut of 25 basis points in June, which was the first modification since a similarly-sized reduction a year earlier. The June 2015 reduction, in turn, was the fourth cut since August 2014.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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