Bank heads cautious about shift in monetary policy

SEOUL, July 17 (Yonhap) -- South Korea's central bank should not consider
shifting the current accommodative monetary policy into a tightening stance as
the economic outlook remains murky, commercial bank heads said Friday.


Last week, the Bank of Korea (BOK) froze its key interest rate at a record low of
2 percent for the fifth straight month. Between October and February, the bank
had made six consecutive rate cuts totaling 3.25 percentage points to prop up the
slumping economy.
"Although the Korean economy seems to be emerging from a downturn, it would be
improper to weigh a change in the central bank's softer monetary policy because
economic uncertainty remains high," the BOK quoted the seven bank chiefs as
saying in a monthly meeting with BOK Gov. Lee Seong-tae.
The statement comes as Lee said in a July 9 rate-setting meeting that the local
economy has emerged from the downward trend, but given that the growth prospects
remain uncertain, the BOK will maintain its accommodative monetary policy for the
time being.
A set of economic indicators are underpinning optimism that the Korean economy is
bottoming out, but data related to corporate investment and employment remained
sluggish, prompting policymakers to be cautious about the pace of the economic
recovery.
The BOK said last week that although the local economy will likely post positive
growth in the second half, recovery would be weak as rising oil prices and waning
effects of the stimulus measures may serve as downside risks to growth.
sooyeon@yna.co.kr
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