ID :
200583
Thu, 08/11/2011 - 08:43
Auther :
Shortlink :
https://oananews.org//node/200583
The shortlink copeid
BOK freezes key rate at 3.25 pct for 2nd month
(ATTN: RECASTS lead; UPDATES with remarks by BOK chief throughout)
By Kim Soo-yeon
SEOUL, Aug. 11 (Yonhap) -- South Korea's central bank froze the key interest rate on Thursday for the second straight month as the grim global economic outlook, sparked by a U.S. rating cut and eurozone debt fears, overshadowed persisting inflation woes.
Bank of Korea (BOK) Gov. Kim Choong-soo said the central bank's stance for policy tightening remained intact, but it will closely assess the impact of external economic risks on the local economy in making any subsequent moves.
His remarks came after he and his fellow policymakers held the benchmark seven-day repo rate steady at 3.25 percent for August, as widely expected.
The unanimous decision came at a delicate time, when external risks such as concerns about a U.S. double-dip downturn and Europe's debt woes are growing while Korea's inflation has topped the upper limit of the BOK's 2-4 percent target band for the seventh straight month in July.
"Global financial markets showed high instability. If the global economy does not sharply slow down, the Korean economy is expected to maintain steady growth. But downside risks to growth are likely to grow due to external economic uncertainty," Kim told a press conference.
Even amid heightened economic uncertainty, the governor expressed concerns about high inflation stemming from the economic recovery and inflation expectations.
"But for now, the BOK has no intention to revise its 2011 inflation projection," Kim said. The bank's estimate is currently set at 4 percent.
Concerns about a global double-dip downturn have heightened after Standard & Poor's lowered the U.S. sovereign rating by one notch to "AA+" from a top-tier "AAA" on Friday, sending the global financial markets into a tailspin.
South Korea's key stock index has slid more than 15 percent since Aug. 2 on panic selling.
The Federal Reserve vowed on Tuesday to keep its federal funds rate near zero at least through mid-2013, adding that it is considering employing additional easy money policies if necessary. But its pledge also underpins concerns that it would take longer for the flagging U.S. economy to pick up.
Touching on the U.S. economy, Kim played down the chance of the world's largest economy falling into a double-dip recession and added that currently, it would not be easy to expect the Fed to undergo a third round of quantitative easing.
On the domestic front, South Korea is facing high inflationary pressure as a hike in public service charges, rising vegetable prices and continued economic growth are putting upward pressure on inflation.
Consumer prices rose 4.7 percent in July from a year earlier, quickening from 4.4 percent growth in June. Core inflation, which excludes volatile oil and food prices, jumped 3.8 percent on-year in July, the fastest gain in 26 months.
"The impact of the won's gain in taming inflation is never small," the governor added.
Analysts said heightened external economic uncertainty is raising the chances that the BOK may freeze the key rate or hike it once more, at best, for the remainder of this year.
"If the current developments in the U.S. and Europe are prolonged, consumer spending will slow and commodity prices could fall," said Yum Sang-hoon, a fixed-income analyst at SK Securities Co.
"Then Korean policymakers' focus will be placed more on the economy than inflation. No rate change is expected for the remainder of this year."
Potential prolongation of current market fears and the grim outlook for the global economy are feared to crimp Korea's exports, which account for about half of its economic output. Some analysts said it may be difficult for Asia's fourth-largest economy to meet its growth target of around 4 percent for this year.
Others also argue that the slowing global economy would put a lid on runaway oil prices, which would help ease inflationary pressure in South Korea, the world's fifth-largest crude buyer.
The BOK has raised the borrowing costs by a total of 1.25 percentage points since July last year in a bid to tame growing inflation risks.
By Kim Soo-yeon
SEOUL, Aug. 11 (Yonhap) -- South Korea's central bank froze the key interest rate on Thursday for the second straight month as the grim global economic outlook, sparked by a U.S. rating cut and eurozone debt fears, overshadowed persisting inflation woes.
Bank of Korea (BOK) Gov. Kim Choong-soo said the central bank's stance for policy tightening remained intact, but it will closely assess the impact of external economic risks on the local economy in making any subsequent moves.
His remarks came after he and his fellow policymakers held the benchmark seven-day repo rate steady at 3.25 percent for August, as widely expected.
The unanimous decision came at a delicate time, when external risks such as concerns about a U.S. double-dip downturn and Europe's debt woes are growing while Korea's inflation has topped the upper limit of the BOK's 2-4 percent target band for the seventh straight month in July.
"Global financial markets showed high instability. If the global economy does not sharply slow down, the Korean economy is expected to maintain steady growth. But downside risks to growth are likely to grow due to external economic uncertainty," Kim told a press conference.
Even amid heightened economic uncertainty, the governor expressed concerns about high inflation stemming from the economic recovery and inflation expectations.
"But for now, the BOK has no intention to revise its 2011 inflation projection," Kim said. The bank's estimate is currently set at 4 percent.
Concerns about a global double-dip downturn have heightened after Standard & Poor's lowered the U.S. sovereign rating by one notch to "AA+" from a top-tier "AAA" on Friday, sending the global financial markets into a tailspin.
South Korea's key stock index has slid more than 15 percent since Aug. 2 on panic selling.
The Federal Reserve vowed on Tuesday to keep its federal funds rate near zero at least through mid-2013, adding that it is considering employing additional easy money policies if necessary. But its pledge also underpins concerns that it would take longer for the flagging U.S. economy to pick up.
Touching on the U.S. economy, Kim played down the chance of the world's largest economy falling into a double-dip recession and added that currently, it would not be easy to expect the Fed to undergo a third round of quantitative easing.
On the domestic front, South Korea is facing high inflationary pressure as a hike in public service charges, rising vegetable prices and continued economic growth are putting upward pressure on inflation.
Consumer prices rose 4.7 percent in July from a year earlier, quickening from 4.4 percent growth in June. Core inflation, which excludes volatile oil and food prices, jumped 3.8 percent on-year in July, the fastest gain in 26 months.
"The impact of the won's gain in taming inflation is never small," the governor added.
Analysts said heightened external economic uncertainty is raising the chances that the BOK may freeze the key rate or hike it once more, at best, for the remainder of this year.
"If the current developments in the U.S. and Europe are prolonged, consumer spending will slow and commodity prices could fall," said Yum Sang-hoon, a fixed-income analyst at SK Securities Co.
"Then Korean policymakers' focus will be placed more on the economy than inflation. No rate change is expected for the remainder of this year."
Potential prolongation of current market fears and the grim outlook for the global economy are feared to crimp Korea's exports, which account for about half of its economic output. Some analysts said it may be difficult for Asia's fourth-largest economy to meet its growth target of around 4 percent for this year.
Others also argue that the slowing global economy would put a lid on runaway oil prices, which would help ease inflationary pressure in South Korea, the world's fifth-largest crude buyer.
The BOK has raised the borrowing costs by a total of 1.25 percentage points since July last year in a bid to tame growing inflation risks.
