ID :
23451
Thu, 10/09/2008 - 12:55
Auther :
Shortlink :
https://oananews.org//node/23451
The shortlink copeid
S. Korean central bank cuts key rate for October
By Kim Soo-yeon
SEOUL, Oct. 9 (Yonhap) -- South Korea's central bank on Thursday slashed its key interest rate by 0.25 percentage point in an apparent effort to prevent global financial turmoil from hurting the slowing economy.
Bank of Korea (BOK) Gov. Lee Seong-tae and his six fellow policymakers cut the
benchmark 7-day repurchase agreement rate to 5 percent, the first rate cut since
November 2004.
The BOK froze the rate at an eight-year high of 5.25 percent in September after
raising it by a quarter percentage point in August to control spiraling
inflation.
The BOK's decision was not in line with a poll of 19 economists by Yonhap
Infomax, the financial news arm of Yonhap News Agency. All economists polled
predicted a rate freeze.
The BOK joined global central banks' moves to cut interest rates with the aim of
stemming the deepening global financial rout.
On Wednesday, the U.S. Federal Reserve slashed its key rate by 0.5 percentage
point to 1.5 percent. Other global central banks like the European Central Bank
and the Bank of England joined the Fed-led coordinated rate cuts.
Economists say the rate reduction came as the BOK responded preemptively to boost
the slowing economy amid growing fears that a global credit squeeze is hurting
the real economy.
Asia's fourth-largest economy is losing ground led by faltering domestic demand.
South Korea's industrial output grew at the slowest pace in 11 months in August.
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 in the second quarter from three months earlier. Consumer
spending dipped for the first time since the second quarter of 2004.
Rising debts, together with higher inflation, are sapping household and corporate
spending, denting domestic demand.
But the rate cut defies growing pressure to rein in inflation. South Korea's
consumer prices climbed 5.1 percent on-year in September, slowing from a 5.6
percent gain in August, as oil and commodity prices showed signs of
stabilization. The country's consumer prices breached the BOK's target range of
2.5-3.5 percent for the 10th straight month.
But core inflation, which excludes volatile food and fuel prices, jumped 5.1
percent on-year last month, accelerating from 4.7 percent in August. The local
currency's steep fall against the U.S. dollar and a possible increase in public
utility rates are also expected to put upward pressure on already-high inflation.
South Korea's foreign exchange market has been suffering from a dollar shortage
as banks and companies are scrambling to hoard the safer greenback on concerns
over a financial crisis sparked by the collapse of investment bank Lehman
Brothers Holdings Inc.
The local currency tumbled to a 10-year low against the dollar on Wednesday due
to concerns that local banks and importers face an acute shortage of dollar
liquidity. The won has fallen more than 32 percent versus the dollar so far this
year.
sooyeon@yna.co.kr
(END)
SEOUL, Oct. 9 (Yonhap) -- South Korea's central bank on Thursday slashed its key interest rate by 0.25 percentage point in an apparent effort to prevent global financial turmoil from hurting the slowing economy.
Bank of Korea (BOK) Gov. Lee Seong-tae and his six fellow policymakers cut the
benchmark 7-day repurchase agreement rate to 5 percent, the first rate cut since
November 2004.
The BOK froze the rate at an eight-year high of 5.25 percent in September after
raising it by a quarter percentage point in August to control spiraling
inflation.
The BOK's decision was not in line with a poll of 19 economists by Yonhap
Infomax, the financial news arm of Yonhap News Agency. All economists polled
predicted a rate freeze.
The BOK joined global central banks' moves to cut interest rates with the aim of
stemming the deepening global financial rout.
On Wednesday, the U.S. Federal Reserve slashed its key rate by 0.5 percentage
point to 1.5 percent. Other global central banks like the European Central Bank
and the Bank of England joined the Fed-led coordinated rate cuts.
Economists say the rate reduction came as the BOK responded preemptively to boost
the slowing economy amid growing fears that a global credit squeeze is hurting
the real economy.
Asia's fourth-largest economy is losing ground led by faltering domestic demand.
South Korea's industrial output grew at the slowest pace in 11 months in August.
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 in the second quarter from three months earlier. Consumer
spending dipped for the first time since the second quarter of 2004.
Rising debts, together with higher inflation, are sapping household and corporate
spending, denting domestic demand.
But the rate cut defies growing pressure to rein in inflation. South Korea's
consumer prices climbed 5.1 percent on-year in September, slowing from a 5.6
percent gain in August, as oil and commodity prices showed signs of
stabilization. The country's consumer prices breached the BOK's target range of
2.5-3.5 percent for the 10th straight month.
But core inflation, which excludes volatile food and fuel prices, jumped 5.1
percent on-year last month, accelerating from 4.7 percent in August. The local
currency's steep fall against the U.S. dollar and a possible increase in public
utility rates are also expected to put upward pressure on already-high inflation.
South Korea's foreign exchange market has been suffering from a dollar shortage
as banks and companies are scrambling to hoard the safer greenback on concerns
over a financial crisis sparked by the collapse of investment bank Lehman
Brothers Holdings Inc.
The local currency tumbled to a 10-year low against the dollar on Wednesday due
to concerns that local banks and importers face an acute shortage of dollar
liquidity. The won has fallen more than 32 percent versus the dollar so far this
year.
sooyeon@yna.co.kr
(END)
