ID :
36109
Wed, 12/17/2008 - 15:31
Auther :
Shortlink :
http://m.oananews.org//node/36109
The shortlink copeid
BOK under pressure to take more action after U.S. rate cut
SEOUL, Dec. 17 (Yonhap) -- The U.S. Federal Reserve's decision to slash the key rate to near zero is widely expected to exert more pressure on South Korea's central bank to continue its monetary easing, analysts said Wednesday.
In a surprise move, the Fed slashed the federal funds rate Tuesday to a range of
zero to 0.25 percent from one percent, marking the lowest level since it first
began to target the rate.
"The Fed's larger-than-expected rate cut pointed to a deepening global recession.
The Bank of Korea (BOK) cannot help but come under some pressure as it has room
to cut the rate further," said Lee Sang-jae, an economist at Hyundai Securities
Co.
On Thursday, the BOK trimmed the benchmark seven-day repo rate by a record one
percentage point to an all-time low of 3 percent in a bid to prop up the slowing
economy. The Korean central bank has slashed the rate by a combined 2.25
percentage points since early October.
"A possibility (for more rate cuts) is always open," BOK Gov. Lee Seong-tae told
a press conference last week after the rate-setting meeting, adding that the BOK
will use its policy tools to provide liquidity and to stabilize the financial
markets.
The move came as the South Korean economy, Asia's fourth-largest, expanded 0.5
percent in the third quarter from three months earlier, the weakest growth in
four years.
Last week, the BOK said the Korean economy is expected to grow 2 percent next
year, down from an estimated 3.7 percent gain this year as a global recession
will likely hurt exports amid stubbornly weak domestic demand. The local economy
expanded a robust 5 percent in 2007.
"Faltering overseas shipments would deepen the economic slump. I think that the
BOK may lower the rate aggressively to 1.5 percent until the first six months of
next year," said the Hyundai Securities economist. Exports account for about 60
percent of the country's economy.
But some analysts pointed out that the BOK may not make potentially steep rate
cuts down the road since monetary easing alone will not be strong enough to boost
the economy and stabilize the financial market.
"The BOK could trim the rate further, but the central bank is expected to
continue to use other tools at the same time, like increasing liquidity to the
financial system," said Kim Jae-eun, an economist at Hana Daetoo Securities Co.
"The BOK's current moves to flood money into the financial system actually helped
the frozen market to turn around."
Amid the slowing economy, local banks and companies have been suffering from cash
shortages as higher credit risks discouraged banks from lending to each other and
to smaller firms and households, deepening a credit squeeze.
On Monday, the central bank said it would pump a combined 6.5 trillion won
(US$4.9 billion) in liquidity into the financial system this week by buying
longer-dated repurchase agreement deals. The government and the BOK have supplied
or plan to supply a combined amount in excess of 130 trillion won in liquidity
into the financial system.
sooyeon@yna.co.kr
(END)
In a surprise move, the Fed slashed the federal funds rate Tuesday to a range of
zero to 0.25 percent from one percent, marking the lowest level since it first
began to target the rate.
"The Fed's larger-than-expected rate cut pointed to a deepening global recession.
The Bank of Korea (BOK) cannot help but come under some pressure as it has room
to cut the rate further," said Lee Sang-jae, an economist at Hyundai Securities
Co.
On Thursday, the BOK trimmed the benchmark seven-day repo rate by a record one
percentage point to an all-time low of 3 percent in a bid to prop up the slowing
economy. The Korean central bank has slashed the rate by a combined 2.25
percentage points since early October.
"A possibility (for more rate cuts) is always open," BOK Gov. Lee Seong-tae told
a press conference last week after the rate-setting meeting, adding that the BOK
will use its policy tools to provide liquidity and to stabilize the financial
markets.
The move came as the South Korean economy, Asia's fourth-largest, expanded 0.5
percent in the third quarter from three months earlier, the weakest growth in
four years.
Last week, the BOK said the Korean economy is expected to grow 2 percent next
year, down from an estimated 3.7 percent gain this year as a global recession
will likely hurt exports amid stubbornly weak domestic demand. The local economy
expanded a robust 5 percent in 2007.
"Faltering overseas shipments would deepen the economic slump. I think that the
BOK may lower the rate aggressively to 1.5 percent until the first six months of
next year," said the Hyundai Securities economist. Exports account for about 60
percent of the country's economy.
But some analysts pointed out that the BOK may not make potentially steep rate
cuts down the road since monetary easing alone will not be strong enough to boost
the economy and stabilize the financial market.
"The BOK could trim the rate further, but the central bank is expected to
continue to use other tools at the same time, like increasing liquidity to the
financial system," said Kim Jae-eun, an economist at Hana Daetoo Securities Co.
"The BOK's current moves to flood money into the financial system actually helped
the frozen market to turn around."
Amid the slowing economy, local banks and companies have been suffering from cash
shortages as higher credit risks discouraged banks from lending to each other and
to smaller firms and households, deepening a credit squeeze.
On Monday, the central bank said it would pump a combined 6.5 trillion won
(US$4.9 billion) in liquidity into the financial system this week by buying
longer-dated repurchase agreement deals. The government and the BOK have supplied
or plan to supply a combined amount in excess of 130 trillion won in liquidity
into the financial system.
sooyeon@yna.co.kr
(END)
