Korea rate freeze tied to global economy
By Kelly OIsen |
April 13, 2011, Wednesday
|
Print Edition
Print Edition
SOUTH Korea's central bank froze its key interest rate yesterday despite rising inflation as it monitors potential threats to the global economy - including Japan's massive earthquake.
The Bank of Korea kept its benchmark base rate at 3 percent at a monthly policy meeting, in line with expectations, after having raised it in two of the previous three months to fight gains in consumer prices.
The bank, however, warned that inflation remains a threat and used hawkish wording in its statement accompanying the decision to suggest further rate hikes in coming months.
South Korea's consumer price index increased 4.7 percent in March from the year before, the government announced earlier this month, as costs for food and gasoline rose. It was the biggest increase in monthly inflation since the 4.8 percent recorded in October of 2008.
Inflation has been outside the bank's "tolerance range" - plus or minus 1 percentage point from its inflation target of 3 percent - for three straight months.
The bank's rate-setting monetary policy committee led by Governor Kim Choong-soo said in a statement after the decision that domestic inflation was likely to continue in coming months and that it will "conduct monetary policy with a greater emphasis on ensuring the basis for price stability is firmly anchored."
It added the word "greater" to April's statement - a clear hint of further rate increases.
The committee also said it expects the global economy to maintain its recovery pace, but cautioned that political unrest in the Middle East and North Africa, euro zone debt worries and Japan's March 11 earthquake could pose "downside risks."
The Bank of Korea kept its benchmark base rate at 3 percent at a monthly policy meeting, in line with expectations, after having raised it in two of the previous three months to fight gains in consumer prices.
The bank, however, warned that inflation remains a threat and used hawkish wording in its statement accompanying the decision to suggest further rate hikes in coming months.
South Korea's consumer price index increased 4.7 percent in March from the year before, the government announced earlier this month, as costs for food and gasoline rose. It was the biggest increase in monthly inflation since the 4.8 percent recorded in October of 2008.
Inflation has been outside the bank's "tolerance range" - plus or minus 1 percentage point from its inflation target of 3 percent - for three straight months.
The bank's rate-setting monetary policy committee led by Governor Kim Choong-soo said in a statement after the decision that domestic inflation was likely to continue in coming months and that it will "conduct monetary policy with a greater emphasis on ensuring the basis for price stability is firmly anchored."
It added the word "greater" to April's statement - a clear hint of further rate increases.
The committee also said it expects the global economy to maintain its recovery pace, but cautioned that political unrest in the Middle East and North Africa, euro zone debt worries and Japan's March 11 earthquake could pose "downside risks."
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