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S. Korea eyes key rate and credit access
By William Sim |
January 5, 2009, Monday
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Print Edition
Print Edition
THE Bank of Korea said it will focus its monetary policy this year on supporting the sagging economy and improving access to credit.
''We'll manage the benchmark interest rate with a focus on improving economic and financial-market conditions,'' the central bank's board said in a statement yesterday on its 2009 policy. ''We'll seek ways to ease the credit squeeze such as providing liquidity actively.''
The central bank cut the key rate by 100 basis points to a record low of 3 percent on December 11, extending the most aggressive round of easing since it began setting a policy rate in 1999. The economy probably shrank last quarter from the third quarter, the first contraction since early 2003, Governor Lee Seong-tae said two weeks ago.
''The central bank, which cut rates aggressively last year, is making it more clear they're ready to take more action to prevent the economy from sliding further,'' said Lee Sung-kwon, an economist at Good Morning Shinhan Securities Co in Seoul. ''The Bank of Korea can't be alone when global central banks are easing policies in the face of a slump.''
The Bank of Korea's policy direction comes a day after Finance Minister Kang Man-soo said the economy will recover in the second half of this year following a contraction in the fourth quarter. President Lee Myung-bak said recently the nation will run an ''economy-emergency government'' to fight the worst economic crisis since its US$57 billion bailout by the International Monetary Fund in 1997.
Policy makers have also pumped funds into the financial system, boosted public spending and cut taxes to cushion the economy against a fallout from the global credit crisis, which sent the Korean won down 26 percent against the United States dollar and the Kospi stock index tumbling 41 percent in 2008.
''We will do all we can to help the economy,'' Kang said on Saturday on KBS television in Seoul. ''The government has the ability to further increase spending and cut taxes.''
The government has already unveiled cuts in taxes worth 35 trillion won (US$26 billion) and 16 trillion won of extra spending, he said, according to Bloomberg News.
The Korean won has risen 8 percent and the Kospi has jumped 20 percent since the nation secured a US$30 billion swap line with the US Federal Reserve on October 30 and the government unveiled steps to boost the economy.
The central bank forecasts that annual economic growth will slow to an 11-year low of 2 percent in 2009 from an estimated 3.7 percent pace last year.
Exports fell more than 15 percent for a second straight month in December.
''We'll manage the benchmark interest rate with a focus on improving economic and financial-market conditions,'' the central bank's board said in a statement yesterday on its 2009 policy. ''We'll seek ways to ease the credit squeeze such as providing liquidity actively.''
The central bank cut the key rate by 100 basis points to a record low of 3 percent on December 11, extending the most aggressive round of easing since it began setting a policy rate in 1999. The economy probably shrank last quarter from the third quarter, the first contraction since early 2003, Governor Lee Seong-tae said two weeks ago.
''The central bank, which cut rates aggressively last year, is making it more clear they're ready to take more action to prevent the economy from sliding further,'' said Lee Sung-kwon, an economist at Good Morning Shinhan Securities Co in Seoul. ''The Bank of Korea can't be alone when global central banks are easing policies in the face of a slump.''
The Bank of Korea's policy direction comes a day after Finance Minister Kang Man-soo said the economy will recover in the second half of this year following a contraction in the fourth quarter. President Lee Myung-bak said recently the nation will run an ''economy-emergency government'' to fight the worst economic crisis since its US$57 billion bailout by the International Monetary Fund in 1997.
Policy makers have also pumped funds into the financial system, boosted public spending and cut taxes to cushion the economy against a fallout from the global credit crisis, which sent the Korean won down 26 percent against the United States dollar and the Kospi stock index tumbling 41 percent in 2008.
''We will do all we can to help the economy,'' Kang said on Saturday on KBS television in Seoul. ''The government has the ability to further increase spending and cut taxes.''
The government has already unveiled cuts in taxes worth 35 trillion won (US$26 billion) and 16 trillion won of extra spending, he said, according to Bloomberg News.
The Korean won has risen 8 percent and the Kospi has jumped 20 percent since the nation secured a US$30 billion swap line with the US Federal Reserve on October 30 and the government unveiled steps to boost the economy.
The central bank forecasts that annual economic growth will slow to an 11-year low of 2 percent in 2009 from an estimated 3.7 percent pace last year.
Exports fell more than 15 percent for a second straight month in December.
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