In Korea, the Committee appraises economic growth to have remained at a weak level, with indicators related to exports and domestic demand alternating between improving and worsening. On the employment front, the increase in number of persons employed in December was somewhat smaller than that the month before, a result mainly of weak construction sector employment due to bad weather conditions. Going forward, the Committee anticipates that the negative output gap in the domestic economy will persist for a considerable time, due mostly to the slow recovery of the global economy in consequence chiefly of the sluggishness of economic activities in the euro area.
Consumer price inflation fell to 1.4% in December, from 1.6% the previous month, owing primarily to the stability in prices of livestock products and industrial goods, and core inflation excluding the prices of agricultural and petroleum products continued to run at a low level at 1.2%. The Committee forecasts that inflation will remain low for the time being, owing primarily to the easing of demand-side pressures. As for housing prices, those in Seoul and its surrounding areas continued on their downtrend and those in the rest of the country on their uptrend.
In the financial markets, stock prices have risen and the Korean won has appreciated against the US dollar, due mostly to the additional quantitative easing policies of major advanced countries and to international financial market stability. Long-term market interest rates have fallen from their end-November levels, fluctuating in response mainly to the economic outlook and to developments in the negotiations on fiscal consolidation in the US.
Looking ahead, the Committee will closely monitor external risk factors and the consequent changes in financial and economic conditions at home and abroad, continue its efforts to lower inflation expectations, and conduct monetary policy so as to keep consumer price inflation within the inflation target range over a medium-term horizon while ensuring that the growth potential is not eroded due to the continuation of slow growth.