Excerpt from the statement by The Bank of Korea:
In Korea, although exports have maintained their trend of recovery and investment-related indicators have rebounded, the Committee appraises economic growth to have sustained its weak level, as consumption has continued its decline of the previous month. On the employment front, the increase in the number of persons employed has accelerated, centering around the 50-and-above age group. Going forward, there is no change to the Committee’s forecast that the domestic economy will show a negative output gap for a considerable time, due mostly to the slow recovery of the global economy and to the influence of Japanese yen weakening.
Inflation appears likely to remain relatively low, due to the weakening of demand-side pressures. However, the Committee forecasts that it will rise above its current level in line with the partial disappearance of downward pressures from institutional factors. 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 moderate uptrend.
In the financial markets, stock prices have fallen substantially and the Korean won has depreciated significantly against the US dollar, as foreigners’ securities investment funds have flowed out in line with the reemergence of euro area risk and with the increase in geopolitical risk in Korea. Long-term market interest rates have continued their downtrend, primarily on concerns about the slowdown in economic recovery.
Looking ahead, the Committee will closely monitor external risk factors and Korea’s geopolitical risk and any consequent changes in financial and economic conditions, 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.