ID :
19118
Fri, 09/12/2008 - 11:25
Auther :
Shortlink :
https://oananews.org//node/19118
The shortlink copeid
S. Korean central bank freezes key rate for September
By Kim Soo-yeon
SEOUL, Sept. 11 (Yonhap) -- South Korea's central bank on Thursday left its key interest rate for September unchanged following last month's rate hike amid conflicting risks of persisting inflation and a slowing economy.
Bank of Korea (BOK) Gov. Lee Seong-tae and his six fellow policymakers froze the benchmark 7-day repurchase agreement rate at a nearly 8-year high of 5.25 percent, as widely expected.
The BOK raised the key rate by a quarter percentage point in August to control spiraling inflation, the first increase in a year.
"The growth of consumer prices in August eased on recent retreats in oil prices, but inflation still remains at a high level," Lee told a press conference after a rate-setting meeting.
"The country's consumer prices in the second half will likely top an earlier
forecast of 5.3 percent," he said, adding that a weaker won and planned
gains in public utility rates will likely prevent inflation from falling for a
considerable period of time.
Economists said the rate freeze came as faltering domestic demand and eased
growth of the country's August inflation would prevent the BOK from tightening
monetary policy for September.
"I think the freeze came as an additional rate hike is feared to hurt
already-weakening domestic demand. Amid increasing uncertainty at home and
abroad, it seemed that it was difficult for the BOK to change its policy stance
this month," said Lee Sung-kwon, an economist at Goodmorning Shinhan
Securities Co., adding that the central bank will likely stay put on the rate
this year.
South Korea's consumer prices jumped 5.6 percent on-year in August, slowing from
a 10-year high of 5.9 percent in July, mainly because oil and commodity prices
showed signs of stabilization. Consumer inflation in August breached the BOK's
target range of 2.5-3.5 percent for the ninth straight month.
But Asia's fourth-largest economy is losing steam, led by faltering domestic
demand. According to the BOK, the South Korean economy expanded 0.8 percent in
the second quarter, as earlier estimated, but domestic demand in the April-June
period was more sluggish than an estimate made in July.
Private spending, one of the main growth engines of the South Korean economy,
declined 0.2 percent from the preceding quarter, compared with an earlier
estimate of a 0.1 percent contraction. Consumer spending dipped for the first
time since it fell 0.1 percent on-quarter in the second quarter of 2004.
"The BOK will focus on preventing growth momentum from weakening and curbing
inflation expectations," the central bank said in a statement.
Although the growth of consumer prices eased somewhat in August, inflation
concerns still linger. The Korean currency's recent steep falls against the U.S.
dollar, sparked by foreign capital flight speculation, are putting upward
pressure on inflation as it makes imports more expensive. Planned gains in public
utilities charges will also add upside pressure to consumer prices. The won has
fallen more than 14 percent against the greenback so far this year.
Gov. Lee told lawmakers last week that the country's inflation is not likely to
top 6 percent this year mainly due to recent retreats in oil prices, but added
that he is not sure it will return to below 5 percent toward the end of the year.
On Sept. 1, South Korea announced a wide range of tax reforms including income
and corporate tax cuts aimed at boosting the country's slowing economy by
stimulating sluggish private consumption and corporate investment.
Meanwhile, Lee said that the South Korean financial markets may face additional
volatility down the road as the country's stocks and currency are considerably
exposed to external conditions.
"It is quite too early to say that all market fluctuations have
passed," he said.
South Korea has been gripped by fears over the possibility of a financial crisis
as overseas investors are rumored to be set to withdraw their capital from the
local bond market en masse this week. Foreigners' bond holdings worth of $6.71
billion matured on Tuesday and Wednesday, but they snapped up more than 2
trillion won ($1.8 billion) in bond markets this month.
sooyeon@yna.co.kr
(END)
SEOUL, Sept. 11 (Yonhap) -- South Korea's central bank on Thursday left its key interest rate for September unchanged following last month's rate hike amid conflicting risks of persisting inflation and a slowing economy.
Bank of Korea (BOK) Gov. Lee Seong-tae and his six fellow policymakers froze the benchmark 7-day repurchase agreement rate at a nearly 8-year high of 5.25 percent, as widely expected.
The BOK raised the key rate by a quarter percentage point in August to control spiraling inflation, the first increase in a year.
"The growth of consumer prices in August eased on recent retreats in oil prices, but inflation still remains at a high level," Lee told a press conference after a rate-setting meeting.
"The country's consumer prices in the second half will likely top an earlier
forecast of 5.3 percent," he said, adding that a weaker won and planned
gains in public utility rates will likely prevent inflation from falling for a
considerable period of time.
Economists said the rate freeze came as faltering domestic demand and eased
growth of the country's August inflation would prevent the BOK from tightening
monetary policy for September.
"I think the freeze came as an additional rate hike is feared to hurt
already-weakening domestic demand. Amid increasing uncertainty at home and
abroad, it seemed that it was difficult for the BOK to change its policy stance
this month," said Lee Sung-kwon, an economist at Goodmorning Shinhan
Securities Co., adding that the central bank will likely stay put on the rate
this year.
South Korea's consumer prices jumped 5.6 percent on-year in August, slowing from
a 10-year high of 5.9 percent in July, mainly because oil and commodity prices
showed signs of stabilization. Consumer inflation in August breached the BOK's
target range of 2.5-3.5 percent for the ninth straight month.
But Asia's fourth-largest economy is losing steam, led by faltering domestic
demand. According to the BOK, the South Korean economy expanded 0.8 percent in
the second quarter, as earlier estimated, but domestic demand in the April-June
period was more sluggish than an estimate made in July.
Private spending, one of the main growth engines of the South Korean economy,
declined 0.2 percent from the preceding quarter, compared with an earlier
estimate of a 0.1 percent contraction. Consumer spending dipped for the first
time since it fell 0.1 percent on-quarter in the second quarter of 2004.
"The BOK will focus on preventing growth momentum from weakening and curbing
inflation expectations," the central bank said in a statement.
Although the growth of consumer prices eased somewhat in August, inflation
concerns still linger. The Korean currency's recent steep falls against the U.S.
dollar, sparked by foreign capital flight speculation, are putting upward
pressure on inflation as it makes imports more expensive. Planned gains in public
utilities charges will also add upside pressure to consumer prices. The won has
fallen more than 14 percent against the greenback so far this year.
Gov. Lee told lawmakers last week that the country's inflation is not likely to
top 6 percent this year mainly due to recent retreats in oil prices, but added
that he is not sure it will return to below 5 percent toward the end of the year.
On Sept. 1, South Korea announced a wide range of tax reforms including income
and corporate tax cuts aimed at boosting the country's slowing economy by
stimulating sluggish private consumption and corporate investment.
Meanwhile, Lee said that the South Korean financial markets may face additional
volatility down the road as the country's stocks and currency are considerably
exposed to external conditions.
"It is quite too early to say that all market fluctuations have
passed," he said.
South Korea has been gripped by fears over the possibility of a financial crisis
as overseas investors are rumored to be set to withdraw their capital from the
local bond market en masse this week. Foreigners' bond holdings worth of $6.71
billion matured on Tuesday and Wednesday, but they snapped up more than 2
trillion won ($1.8 billion) in bond markets this month.
sooyeon@yna.co.kr
(END)
