Korea: Central Bank keeps rate on hold dashing hopes for stimulus
September 13, 2012
At its 13 September monetary policy meeting, the Bank of Korea (BoK) left the Base Rate unchanged at 3.00%, as monetary authorities continue to evaluate the latest developments on the European debt crisis. The decision surprised the market, which had expected the Bank to add further stimulus to buttress economic activity amid slumping exports and slowing domestic demand. In the accompanying statement, the BoK referred to the deepening of the Euro area crisis, in addition to signs of moderation in emerging markets and a weak recovery in the United States. Against this backdrop, the Bank reiterated that "the negative output gap in the domestic economy will be sustained for a considerable time going forward, due mostly to the prolongation of the euro area fiscal crisis and to the sluggishness of the global economy".