Excerpt from the statement by The Bank of Korea:
The Committee expects the global economy to sustain its modest recovery going forward, but judges that the uncertainties related for instance to the possibility of an earlier-than-expected tapering off of US quantitative easing policy and to the implementations of fiscal consolidation in major countries remain as downside risks to growth.
In Korea, consumption and facilities investment have declined but the Committee appraises economic growth to be continuing, albeit weakly, as exports have improved and construction investment has increased to a great extent. 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.
Consumer price inflation declined to 1.0% in May, from 1.2% in the previous month. Core inflation excluding agricultural and petroleum product prices rose to 1.6%, from 1.4% in April. The Committee forecasts that inflation will remain low for the time being, provided there are no occurrences of exceptional factors on the supply side such as fluctuations in the prices of international oil and agricultural products.
Looking ahead, the Committee, while closely monitoring the trends of changes in external risk factors and the effects of the previous month’s Base Rate cut and the economic policies of the government, including the supplementary budget, will 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.