ID :
212105
Tue, 10/11/2011 - 06:11
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https://oananews.org//node/212105
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BOK expected to freeze key rate for Oct.: poll
SEOUL (Yonhap) - South Korea's central bank is expected to freeze its benchmark interest rate for October as a dimmer global economic outlook overshadows inflation concerns, a poll showed Tuesday.
All 17 economists forecast that the Bank of Korea (BOK) will leave the benchmark seven-day repo rate unchanged at 3.25 percent for the fourth straight month on Thursday, according to the survey by Yonhap Infomax, the financial news arm of Yonhap News Agency.
Analysts said growing external economic risks like a faltering U.S. economy and Europe's debt crisis will prompt BOK policymakers to freeze the key rate this month amid slowed inflation growth.
"The BOK is expected to stand pat on the rate on concerns that dimmer global economic outlooks will dent economic activities. Korea's exports have weathered the global downturn well, but they are expected to slow down," said Yoon Yeo-sam, a fixed-income analyst at Daewoo Securities Co.
In a separate poll, 96.3 percent of 160 bond traders forecast a rate freeze for this month, higher than the 95.6 percent prediction made in August.
The prospects for the global economy are getting bleaker as a sputtering growth of the U.S. economy and the eurozone sovereign strains are raising concerns that the global economy may slide back into a recession.
The Federal Reserve fell short of taking further monetary easing, but it unveiled a plan last month to reallocate its bond portfolio in a bid to boost the economy. The European Central Bank froze the key rate at 1.5 percent in October but pledged to pour liquidity into struggling banks to avert another credit crunch.
BOK Gov. Kim Choong-soo cut the central bank's 2011 and 2012 growth forecast on Friday, indicating that the export-dependent Korean economy will be inevitably hurt by the global slowdown.
The governor said that the Korean economy is likely to grow at a slower pace than the BOK's earlier forecast of 4.3 percent in 2011 although its growth will be higher than 4 percent. He projected that the local economy will likely grow at the low-4 percent range for 2012, slowing from the bank's previous estimate of 4.6 percent.
South Korea's industrial output fell for the second straight month in August amid growing uncertainties surrounding global market situations.
Experts said that the September inflation data is likely to give some excuses to BOK policymakers in freezing the key rate.
Consumer prices rose 4.3 percent in September from a year earlier, slowing from a three-year high of 5.3 percent in August. Core inflation, which excludes volatile oil and food prices, climbed 3.9 percent on-year last month, slightly down from 4 percent in August.
But the eased growth of inflation does not mean that upward pressures on consumer prices were dispelled as the local currency's recent weakness is feared to add to price pressure.
Consumer prices surpassed the upper ceiling of the BOK's 2-4 percent inflation target band for the ninth consecutive month, fanning concerns that the BOK may fail to meet its whole-year inflation target of 4 percent.
According to the poll, more analysts forecast that the BOK is likely to leave the key rate unchanged for the rest of the year, but some experts even penciled in a chance of a rate cut down the road.
The BOK said in a monetary policy report that it plans to take a cautious approach to managing the rate policy by considering risk factors at home and abroad, spawning speculation that the bleaker global outlooks will lead the BOK to take no action this year.
Last month, Gov. Kim downplayed the possibility of a rate cut, saying that the current economic growth momentum does not warrant one.
"Growing prospects of the economic downturn may exert high pressure (on the BOK) to cut the rate. But given lingering inflationary pressure that will continue into next year, the BOK is likely to keep the borrowing costs steady throughout next year," said Shin Dong-jun, a fixed-income analyst at Dongbu Securities Co.
But Lee Jung-beom, a fixed-income analyst at Korea Investment & Securities, did not exclude the possibility of a rate cut down the road, saying that the central bank may slash the key rate in early 2012, citing that the economy is slowing and inflation growth is expected to be in the 3 percent range.
The BOK has raised the borrowing costs by a total of 1.25 percentage points in five steps since July of last year in a bid to tame growing inflation risks.
All 17 economists forecast that the Bank of Korea (BOK) will leave the benchmark seven-day repo rate unchanged at 3.25 percent for the fourth straight month on Thursday, according to the survey by Yonhap Infomax, the financial news arm of Yonhap News Agency.
Analysts said growing external economic risks like a faltering U.S. economy and Europe's debt crisis will prompt BOK policymakers to freeze the key rate this month amid slowed inflation growth.
"The BOK is expected to stand pat on the rate on concerns that dimmer global economic outlooks will dent economic activities. Korea's exports have weathered the global downturn well, but they are expected to slow down," said Yoon Yeo-sam, a fixed-income analyst at Daewoo Securities Co.
In a separate poll, 96.3 percent of 160 bond traders forecast a rate freeze for this month, higher than the 95.6 percent prediction made in August.
The prospects for the global economy are getting bleaker as a sputtering growth of the U.S. economy and the eurozone sovereign strains are raising concerns that the global economy may slide back into a recession.
The Federal Reserve fell short of taking further monetary easing, but it unveiled a plan last month to reallocate its bond portfolio in a bid to boost the economy. The European Central Bank froze the key rate at 1.5 percent in October but pledged to pour liquidity into struggling banks to avert another credit crunch.
BOK Gov. Kim Choong-soo cut the central bank's 2011 and 2012 growth forecast on Friday, indicating that the export-dependent Korean economy will be inevitably hurt by the global slowdown.
The governor said that the Korean economy is likely to grow at a slower pace than the BOK's earlier forecast of 4.3 percent in 2011 although its growth will be higher than 4 percent. He projected that the local economy will likely grow at the low-4 percent range for 2012, slowing from the bank's previous estimate of 4.6 percent.
South Korea's industrial output fell for the second straight month in August amid growing uncertainties surrounding global market situations.
Experts said that the September inflation data is likely to give some excuses to BOK policymakers in freezing the key rate.
Consumer prices rose 4.3 percent in September from a year earlier, slowing from a three-year high of 5.3 percent in August. Core inflation, which excludes volatile oil and food prices, climbed 3.9 percent on-year last month, slightly down from 4 percent in August.
But the eased growth of inflation does not mean that upward pressures on consumer prices were dispelled as the local currency's recent weakness is feared to add to price pressure.
Consumer prices surpassed the upper ceiling of the BOK's 2-4 percent inflation target band for the ninth consecutive month, fanning concerns that the BOK may fail to meet its whole-year inflation target of 4 percent.
According to the poll, more analysts forecast that the BOK is likely to leave the key rate unchanged for the rest of the year, but some experts even penciled in a chance of a rate cut down the road.
The BOK said in a monetary policy report that it plans to take a cautious approach to managing the rate policy by considering risk factors at home and abroad, spawning speculation that the bleaker global outlooks will lead the BOK to take no action this year.
Last month, Gov. Kim downplayed the possibility of a rate cut, saying that the current economic growth momentum does not warrant one.
"Growing prospects of the economic downturn may exert high pressure (on the BOK) to cut the rate. But given lingering inflationary pressure that will continue into next year, the BOK is likely to keep the borrowing costs steady throughout next year," said Shin Dong-jun, a fixed-income analyst at Dongbu Securities Co.
But Lee Jung-beom, a fixed-income analyst at Korea Investment & Securities, did not exclude the possibility of a rate cut down the road, saying that the central bank may slash the key rate in early 2012, citing that the economy is slowing and inflation growth is expected to be in the 3 percent range.
The BOK has raised the borrowing costs by a total of 1.25 percentage points in five steps since July of last year in a bid to tame growing inflation risks.
