Korea: Central Bank stays put in July
July 14, 2011
At the monetary policy meeting held on 14 July, the Bank of Korea (BoK) kept the Base Rate unchanged at 3.25%, in a decision which was in line with market analysts' expectations. The move marks a pause in a tightening cycle, which has seen the BoK raising the policy rate five times in the last eleven months, pushing the rate to its highest level since November 2008. According to analysts, the decision to keep rates unchanged was mainly motivated by external factors, as the sovereign debt crisis in the Eurozone and the growth slowdown in the United States increased the downward risks present within the global economy. That said, price pressures are mounting, with inflation rising from 4.1% in May to 4.4% in June. In the statement accompanying the decision, the BoK stated that inflationary pressures are expected to persist in the months to come and that it will conduct its monetary policy with a ?greater emphasis? on ensuring price stability. Market analysts interpreted the last statement as a signal that the BoK will resume its hiking cycle as early as its next meeting in August.
Author: Armando Ciccarelli, Head of Data Solutions