S.korea C.bank Signals To Keep Rates Low-Update 2
Thursday February 11, 2010 09:28:02 AM GMT
* Bank of Korea keeps base rate at record low, as expected
* Says to maintain easy policy for time being
* Notes uncertainties in economy, Europe debt problem
* Governor’s news conference due from 0220 GMT
(Updates with statement, markets, analyst)
By Seo Eun-kyung and Yoo Choonsik
SEOUL, Feb 11 (Reuters) – South Korea’s central bank on
Thursday signalled it would keep its policy at a record low of
2 percent for the time being, citing lingering uncertainties
over the economic outlook and European sovereign debt problems.
The Bank of Korea left its 7-day repurchase agreement rate
unchanged as widely expected for the 12th consecutive month and
its comments dampened the risk of a near term rate rise.
Treasury bond futures rose after the comments but gains
were limited as investors waited for a new conference due to be
held by Governor Lee Seong-tae at 0220 GMT.
“In the coming months, the Korean economy will likely
sustain its positive growth trends,” the central bank said in a
statement.
“However, there is a considerable degree of uncertainty
over the actual growth path, including the possibility of
financial market turbulence caused by the fiscal deficit
problems in the euro-area,” it said.
In a separate statement, it said it would maintain its easy
monetary policy stance for the time being, a phrase widely
taken by investors as suggesting no interest rate increase in
the next month.
“The remarks cement the market’s expectations that the Bank
of Korea will keep the current interest rates until
uncertainties from foreign countries clear. I think the rate
will be raised in June or July,” said Hwang Tae-yeon, a
fixed-income analyst at Tong Yang Securities.
Analysts had already pushed back their expectations for a
rate rise to the second quarter as policymakers wait for more
signs of sustainable economic growth amid recent worries that
China’s tightening of monetary conditions and euro-zone debt
worries could sap a global recovery.
Last week, the Australian central bank surprised financial
markets by skipping a rate rise, noting tighter policy in China
and concerns over sovereign debt abroad.
The Bank of Korea slashed its policy rate by 3.25
percentage points in six steps between October 2008 and
February 2009 to counter the worst global financial crisis in
decades.
(Additional reporting by Cheon Jong-woo; Editing by Jonathan
Hopfner and Neil Fullick)
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