South Korea C.bank Vows Low Rates; Rise Seen In H2
By Seo Eun-kyung
SEOUL (Reuters) – South Korea’s central bank on Thursday vowed to leave interest rates at a record-low for now in the face of uncertainty over the economic outlook and pressure from the government.
The Bank of Korea kept the 7-day repurchase agreement rate unchanged at 2 percent for a 13th consecutive month, as widely expected, and said the economy faced uncertainties such as sovereign debt problems in Europe. click
here
President Lee Myung-bak is widely expected to appoint his close aide Euh Yoon-dae as the new central bank chief this month, which analysts said means interest rates would stay unchanged for several more months.
“It will take time for the new governor and new monetary policy committee members to figure out what’s going on at the Bank of Korea, so the new governor is unlikely to raise rates right after he takes the position,” said Kong Dong-rak, a fixed-income analyst at Taurus Investment & Securities.
Governor Lee Seong-tae’s four-year term ends at the end of this month and two other members of the seven-member board will also leave at the end of their terms next month.
Analysts expect the government will likely keep up pressure on the central bank to hold rates steady at least until elections of provincial governors and regional council members in early June.
“I maintain my view that the Bank of Korea will start to raise interest rates probably in June by 25 bps, when inflationary pressure is getting stronger,” Kong said.
Continued…
Source: in.reuters.com