Korea: Central Bank leaves rates on hold amid growth concerns
October 13, 2011
At its 13 October monetary policy meeting, the Bank of Korea (BoK) kept the Base Rate unchanged at 3.25%, a decision that was in line with market analysts' expectations. After tightening the policy reins in June, the BoK has now refrained from raising rates for four consecutive meetings. At the current 3.25%, the policy rate is at its highest level since November 2008. In the statement accompanying the decision, the BoK highlighted increasing downward risks to the growth outlook in major economies. The subdued global outlook adds uncertainty to development prospects for the export-dependent Korean economy, despite an improvement in domestic factors in recent months. Meanwhile, inflationary pressures moderated, with inflation dropping from 5.3% in August to 4.3% in September on the back of declining prices for agricultural products. The BoK ?expects the pace of decline in inflation to be modest in the coming months, given stubbornly high inflation expectations?. The BoK reiterated that its monetary policy will focus on price stability. According to market analysts, however, the BoK's reference to external downside risks is a signal that the Bank intends to keep interest rates on hold going forward.
Author: Armando Ciccarelli, Head of Data Solutions