South Korea Central Bank holds Interest rates in the second week of February

12th February 2014

South Korea's central bank maintained its base rate at 2.50 percent, as expected, saying the economic recovery is continuing and inflation will remain low for the being, due to stable international commodity prices, but eventually rise.
    The Bank of Korea (BOK), which cut its rate by 25 basis points in 2013, also said it expects the global economy to sustain its "modest" recovery going forward but it could be affected by changes in global financial market conditions from the U.S. Federal Reserve's tapering of quantitative easing and weaker growth in some emerging markets.
    Some of the indicators related to domestic demand in Korea have recently slumped, the BOK said, but exports continue to rise, sustaining the overall economic expansion.
    Korea's Gross Domestic Product expanded by an annual 3.9 percent in the fourth quarter of last year, up from 3.3 percent in the third quarter, for average 2013 growth of 2.8 percent, up from 2.0 percent in 2012, and the strongest growth in two years.
    "The Committee expects that the domestic economy will maintain a negative output gap for the time being going forward, although it forecasts that the gap will gradually narrow," the BOK said.

    Last month the BOK forecast that Korea's economy would expand by 3.8 percent in 2014 and then accelerate to 4.0 percent in 2015.
    Korea's inflation rate averaged 1.3 percent in 2013, far below the BOK's target range of 2.5-3.5 percent, but in its latest forecast the bank expects inflation this year to rise to 2.3 percent and then to 2.8 percent in 2015.
    In the first half  of this year inflation is expected to remain below the bank's target range but then rise in the second half.
    In January, Korea's headline inflation rate was steady at 1.1 percent from December.
    The BOK said Korean stock prices had recently rebounded and the won appreciated, reversing a depreciation of the won and lower stock prices due to the instability of international financial markets and outflows of foreigners' stock investment funds.
    Against the U.S. dollar, the won depreciated in the first half of 2013 before rebounding in the second half to end the year only 0.7 percent firmer. Since the start of the year, the won has eased 0.6 percent, trading at 1062.4 to the dollar today.
    Against the Japanese yen, the won has been rising since October 2011 when it hit a low of 15.6 and declined to 10 to the yen around the end of 2013, a rise of almost 36 percent. Since the start of this year, the won has eased slightly but was still trading at 10.36 today.
    Last month the governor of the BOK, Kim Choongsoo said the rapid depreciation of the yen against the won over the last year has hurt the South Korean industries that compete directly with Japan - such as steel, autos, machinery and electrical appliances - and any further depreciation of the yen would cause widespread pain to South Korea's exporters.
     However, he also ruled out a competitive devaluation of the won


South Korea holds rate, recovery continues, inflation low - Central Bank News

South Korea Central Bank holds Interest rate steady, sees recovery, higher inflation

8th January 2014

South Korea's central bank held its base rate steady at 2.5 percent, as expected, and maintained its recent view that the country's economic recovery is continuing in line with its growth trend while exports and consumption have continued to improve.
    The Bank of Korea (BOK), which cut its rate by 25 basis points in 2013, also said it expects inflation to gradually rise but remain low for the time being, largely due to stable international agricultural prices.
    Korea's headline inflation rate eased to 1.1 percent in December from 1.2 percent in November for an average rate of 1.3 percent for 2013, down from 2.2 percent in 2012.
    The BOK targets annual inflation of 2.5-3.5 percent and in October forecast 2013 inflation of 1.2 percent and 2.5 percent inflation in 2014.
     Last month the BOK said it expects inflation to rise in 2014 as the domestic economy improves.
    Korea's Gross Domestic Product rose by 1.1 percent in the third quarter from the second quarter for annual growth of 3.3 percent, up from a 2.3 percent growth rate in the second quarter and 1.5 percent in the first quarter.

    "The Committee expects that the domestic economy will maintain a negative output gap for the time being going forward, although it forecasts that the gap will gradually narrow," the BOK said.
    The central bank said the global economy will sustain its modest recovery going forward though it added that this could be affected by changes in global financial markets from the U.S. Federal Reserve's tapering of quantitative easing.
     "Looking ahead, while paying close attention to developments in and the influences of external risk factors arising from shifts in major countries' monetary policies, the Committee will conduct monetary policy so as to keep consumer price inflation within the inflation target range over a medium-term horizon while supporting the continued recovery of economic growth," the BOK said.


Korea holds rate steady, sees recovery, higher inflation - Central Bank News

South Korea Central Bank too held rates last week , says moderate growth continues

South Korea's central bank held its base rate steady at 2.5 percent, as widely expected, saying the country's moderate economic growth is continuing with exports and consumption improving while inflation should remain low despite the recent rise in oil prices.

    The Bank of Korea (BOK), which cut its rate in May, repeated that it expects the economy's negative output gap to remain for a considerable time though it will gradually narrow.
    Despite the weak global economy, Korea is starting to pick up with second quarter Gross Domestic Product recording its strongest quarterly growth rate in nine quarters. GDP rose 1.1 percent from the first quarter for annual growth of 2.3 percent, boosted by government spending.
    Economists expect the BOK to maintain its rate through the first half of next year before its starts raising rates. In July the BOK raised its 2013 growth forecast to 2.8 percent.
    The central bank noted that the scale of increases in the number of persons employed has expanded in line with increases in the 50-and-above age group and the service sector.
    But while the BOK expects the global economy to sustain its "modest recovery," the bank said there were still downside risks, pointing to the uncertainties surrounding the scale of tapering of Quantitative Easing by the U.S. Federal Reserve, fiscal consolidation in major countries, financial instability in some emerging countries and geopolitical risks in the Middle East.

    South Korea's headline inflation eased to 1.3 percent in August from 1.4 percent in July, and the BOK has forecast average inflation this year of 1.7 percent. It targets inflation of 2.5-3.5 percent.
    Following the launch of the Bank of Japan's new phase of monetary easing in April, the won rose over 10 percent against the Japanese yen by mid-May, raising alarm bells in Korea over the competitiveness of its exporters. 
    But it fell back from late May through mid-June, in line with most emerging market currencies, before it started rising again as investors returned, trading at 10.88 won to the Japanese yen today, up from 12.26 at the start of the year, a gain of 11 percent.
    "In the domestic financial markets, despite the heightened volatility in the international financial markets and the instabilities in the financial and foreign exchange markets of some emerging economies, stock prices have risen and the Korean won has appreciated, due mainly to the net inflows of foreigners' stock investment funds," the BOK said.

South Korea holds rate, says moderate growth continues - Central Bank News

for more details log on to Bank of Korea website : http://www.bok.or.kr/eng/engMain.action 

Korea Central Bank holds rate last week , inflation stable but seen rising

South Korea's central bank kept its base rate steady at 2.50 percent, as widely expected, saying inflation is forecast to remain stable due to a continued negative output gap in the economy but prices  will rise in coming months due to imbalances in agricultural supply from bad weather and an unfavourable comparison with very low rates last year.
    The Bank of Korea (BOK), which cut its rate in May, repeated last month's statement that Korea's economy was continuing to expand, albeit moderately, mainly led by exports. The economy's negative output gap will remain for a considerable time but gradually narrow.
    Korea's economy recorded its strongest quarterly growth rate in nine quarters in the second quarter of this year, with Gross Domestic Product up by 1.1 percent from the first, for annual growth of 2.3 percent, up from 1.5 percent in the previous quarter. Fresh government spending helped boost growth.
    Last month the BOK raised its 2013 growth forecast to 2.8 percent, with GDP rising 3.7 percent in the second half of the year from 1.9 percent in the first half.
    South Korea's inflation rate rose to 1.4 percent in July from 1.0 percent in June due to higher prices of agricultural and livestock products, as well as petroleum products. The BOK targets inflation of 2.5-3.5 percent and has forecast average inflation this year of 1.7 percent.

    The BOK took note of a stabilisation of its financial markets due to "the easing of concerns about an earlier-than-expected tapering off of US quantitative easing," adding that long-term market interest rates have risen modestly, primarily on improved global economic indicators.
    "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 BOK said.
    Following the launch of the Bank of Japan's new phase of monetary easing in April, the won rose over 10 percent against the Japanese yen by mid-May, raising alarm bells in Korea over the competitiveness of its exporters. The won then eased through mid-June and has risen again.
    Compared with the start of the year, the won is up 5.7 percent against the yen, quoted at 11.55 per yen today.
    Repeating last month's statement, the BOK also said it still expects the global economy to sustain its modest recovery, helped primarily by the U.S. economy, but the downside risks comprise changes in global financial market conditions related to the exit strategy of the Federal Reserve, a slowdown in Chinese economic growth and uncertainties surrounding the implementation of fiscal consolidation in major countries

Korea holds rate, inflation stable but up in coming months - Central Bank News

for more details log on to Bank of Korea website : http://www.bok.or.kr/eng/engMain.action 

Korea Central Bank holds rate, economic growth still weak

 South Korea's central bank held its base rate steady at 2.50 percent and expects inflation to gradually rise in the second half of the year from last year's low base while the economy continues to grow weakly and will be below its potential output for a "considerable time going forward" due to the slow recovery of the global economy.
    The Bank of Korea (BOK), which cut rates by 25 basis points in May, said exports had generally been favorable while "indicators of domestic demand have alternated between improvement and worsening."
    The global economy is expected to continue its "modest recovery going forward" but the BOK considers the downside risks to growth to comprise "the possibility of an earlier-than-expected tapering off of US quantitative easing and a slowdown in Chinese economic growth, and to the implementation of fiscal consolidation in major countries."
    Just as in major international financial markets, Korea's markets have been volatile in recent months with stock prices falling substantially due to outflows of foreigners' investment funds and long-term market interest rates rising in concert with those of major economies.
    "After having depreciated greatly, the Korean won has appreciated to a considerable extent," the BOK said.
    Following the Bank of Japan's launch of a new more aggressive quantitative easing in early April, the won rose over 10 percent against the Japanese yen through late May, causing concern over the competitiveness of Korean exporters. But the won then reversed course until mid-June when it started rising again.
    Compared with the start of the year, the won has risen almost seven percent against the yen, quoted at 11.33 per yen earlier today.
    In response to the slower-than-expected recovery and the additional competitive pressure on South Korea's exporters from the higher won, the government in May approved a 17.3 trillion won supplementary budget - its third largest ever and only surpassed by stimulus after the 1998 Asian crises and the 2008 global financial crises.
    The government expects the budget should help boost economic growth to 2.8 percent this year from 2.0 percent in 2012 and the BOK also raised its Gross Domestic Product growth forecast for 2013 to 2.8 percent, up from its previous forecast of 2.6 percent, with GDP rising 3.7 percent in the second half of this year compared with 1.9 percent in the first half.
     For 2014 the BOK now expects growth of 4.0 percent, up from its April forecast of 3.8 percent.
    The main driver behind the higher forecast is construction investment, seen rising 4.5 percent this year, up from a previous forecast of 2.7 percent, while exports are seen rising 5.1 percent this year, down from a previous 5.2 percent. In 2014 exports are seen expanding by 8.0 percent, down from a previous forecast of 8.3 percent.

    In the first quarter of this year, South Korea's GDP grew by 0.8 percent from the fourth quarter of 2012 for annual growth of 1.5 percent.
    Korea's headline inflation rate was steady at 1.0 percent in June from May, continuing a declining trend seen since mid-2011. The BOK targets inflation of 2.5-3.5 percent.
    In its latest forecast, the BOK revised downward its headline inflation forecast for this year, seeing prices rise by an average 1.7 percent, down from a previous forecast of 2.3 percent. In 2014 prices are forecast to rise by 2.9 percent, up from 2.8 percent

Korea holds rate, economic growth still weak - Central Bank News

For more details log on to Bank of Korea website : http://www.bok.or.kr/eng/engMain.action