South Korean Monetary Policy Unchanged in August


The Monetary Policy Committee of the Bank of Korea decided on August 8th to leave the Base Rate unchanged at 2.50 percent. The Committee left its monetary policy unchanged for the 3rd straight meeting as its assessment on the economy points to recovery.

Excerpt from the statement by the Bank of Korea:

Based on currently available information, the Committee considers the moderate economic recovery in the US to have been sustained but the sluggishness of economic activities in the euro area to have continued, while economic growth in emerging market countries such as China has slowed somewhat. The Committee forecasts that the global economy will sustain its modest recovery going forward but judges that the possibilities of changes in global financial market conditions related to the exit strategy of the US Federal Reserve remains as downside risks to growth.

In Korea, the Committee appraises economic growth to be continuing, albeit moderately, mainly led by exports. On the employment front, the increase in the number of persons employed has accelerated. The Committee expects that the domestic economy will maintain a negative output gap for a considerable time going forward, although it forecasts that the gap will gradually narrow.

Consumer price inflation rose to 1.4 percent in July, from 1.0 percent the previous month. The Committee forecasts that inflation will show a stable trend for the time being as the output gap remains negative, although it will rise above its present level due mainly to imbalances in agricultural product supply and demand caused by bad weather and to a base effect from its low rate of increase in the second half of last year.

The domestic financial markets have generally stabilized with the easing of concerns about an earlier-than-expected tapering off of US quantitative easing. Long-term market interest rates have risen modestly. Stock prices, after having risen due to a shift to net inflows of foreigners’ stock investment funds, have fallen back somewhat recently and the Korean won has appreciated.

The Committee 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

South Korean Monetary Policy Unchanged in August


BoK | Nuno Fontes | nuno@tradingeconomics.com
8/8/2013 8:49:26 AM