ID :
19101
Fri, 09/12/2008 - 11:14
Auther :
Shortlink :
http://m.oananews.org//node/19101
The shortlink copeid
S. Korean central bank freezes key rate for September By Kim Soo-yeon
SEOUL, Sept. 11 (Yonhap) - South Korea's central bank on Thursday left its key interest rate for September unchanged following last month's rate hike amid eased inflation growth and a slowing economy.
Bank of Korea (BOK) Gov. Lee Seong-tae and his six fellow policymakers froze the
benchmark 7-day repurchase agreement rate at a nearly 8-year high of 5.25
percent. The BOK raised the key rate by a quarter percentage point in August to
control spiraling inflation, the first increase in a year.
The BOK's decision was in line with a forecast by 15 economists from 17 financial
institutions in a poll by Yonhap Infomax, the financial news arm of Yonhap News
Agency.
Economists said the rate freeze came as faltering domestic demand and eased
growth of the country's August inflation would prevent the BOK from tightening
monetary policy for September.
"I think the freeze came as an additional rate hike is feared to hurt
already-weakening domestic demand. Amid increasing uncertainty at home and
abroad, it seemed that it was difficult for the BOK to change its policy stance
this month," said Lee Sung-kwon, an economist at Goodmorning Shinhan
Securities Co., adding that the central bank will likely stay put on the rate
this year.
South Korea's consumer prices jumped 5.6 percent on-year in August, slowing from
a 10-year high of 5.9 percent in July, mainly because oil and commodity prices
showed signs of stabilization. Consumer inflation in August breached the BOK's
target range of 2.5-3.5 percent for the ninth straight month.
But Asia's fourth-largest economy is losing steam, led by faltering domestic
demand. According to the BOK, 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 from the preceding quarter, compared with an earlier
estimate of a 0.1 percent contraction. Consumer spending dipped for the first
time since it fell 0.1 percent on-quarter in the second quarter of 2004.
Although the growth of consumer prices eased somewhat in August, inflation
concerns still linger. The Korean currency's recent steep falls against the U.S.
dollar, sparked by foreign capital flight speculation, are putting upward
pressure on inflation as it makes imports more expensive. Planned gains in public
utilities charges will also add upside pressure to consumer prices. The won has
fallen more than 14 percent against the greenback so far this year.
Gov. Lee told lawmakers last week that the country's inflation is not likely to
top 6 percent this year mainly due to recent retreats in oil prices, but added
that he is not sure it will return to below 5 percent toward the end of the year.
On Sept. 1, South Korea announced a wide range of tax reforms including income
and corporate tax cuts aimed at boosting the country's slowing economy by
stimulating sluggish private consumption and corporate investment.
Bank of Korea (BOK) Gov. Lee Seong-tae and his six fellow policymakers froze the
benchmark 7-day repurchase agreement rate at a nearly 8-year high of 5.25
percent. The BOK raised the key rate by a quarter percentage point in August to
control spiraling inflation, the first increase in a year.
The BOK's decision was in line with a forecast by 15 economists from 17 financial
institutions in a poll by Yonhap Infomax, the financial news arm of Yonhap News
Agency.
Economists said the rate freeze came as faltering domestic demand and eased
growth of the country's August inflation would prevent the BOK from tightening
monetary policy for September.
"I think the freeze came as an additional rate hike is feared to hurt
already-weakening domestic demand. Amid increasing uncertainty at home and
abroad, it seemed that it was difficult for the BOK to change its policy stance
this month," said Lee Sung-kwon, an economist at Goodmorning Shinhan
Securities Co., adding that the central bank will likely stay put on the rate
this year.
South Korea's consumer prices jumped 5.6 percent on-year in August, slowing from
a 10-year high of 5.9 percent in July, mainly because oil and commodity prices
showed signs of stabilization. Consumer inflation in August breached the BOK's
target range of 2.5-3.5 percent for the ninth straight month.
But Asia's fourth-largest economy is losing steam, led by faltering domestic
demand. According to the BOK, 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 from the preceding quarter, compared with an earlier
estimate of a 0.1 percent contraction. Consumer spending dipped for the first
time since it fell 0.1 percent on-quarter in the second quarter of 2004.
Although the growth of consumer prices eased somewhat in August, inflation
concerns still linger. The Korean currency's recent steep falls against the U.S.
dollar, sparked by foreign capital flight speculation, are putting upward
pressure on inflation as it makes imports more expensive. Planned gains in public
utilities charges will also add upside pressure to consumer prices. The won has
fallen more than 14 percent against the greenback so far this year.
Gov. Lee told lawmakers last week that the country's inflation is not likely to
top 6 percent this year mainly due to recent retreats in oil prices, but added
that he is not sure it will return to below 5 percent toward the end of the year.
On Sept. 1, South Korea announced a wide range of tax reforms including income
and corporate tax cuts aimed at boosting the country's slowing economy by
stimulating sluggish private consumption and corporate investment.
