Reuters logo
UPDATE 2-S.Korea holds rates, resists turning hawkish amid spending risks
2017年7月13日 / 凌晨1点27分 / 4 个月前

UPDATE 2-S.Korea holds rates, resists turning hawkish amid spending risks

* BOK keeps rates at 1.25 pct (Reuters poll 1.25 pct)

* BOK upgrades 2017 growth outlook to 2.8 pct vs 2.6 pct seen earlier

* Governor Lee says job growth, consumption lags expectations (Updates with BOK Governor presser, adds analyst comment)

By Cynthia Kim and Christine Kim

SEOUL, July 13 (Reuters) - South Korea’s central bank on Thursday held rates steady even as it boosted its growth forecasts, resisting any temptation to join global counterparts in talking up tightening prospects as weak consumption argued for a further period of accommodative policy.

The won currency and stocks cheered Bank of Korea Governor Lee Ju-yeol’s commitment to support the economy, after the monetary policy committee kept its base rate at a record-low 1.25 percent, where it has been since June 2016.

Lee cited robust exports and corporate investment for raising the economic growth forecast to 2.8 percent this year, from the 2.6 percent projected in April, though he was not willing to bet that solid global demand will alone be able to strengthen the economic recovery.

“From a macro-economic standpoint, the economy is recovering for sure. However, conditions in the job market and household income situations are still lagging expectations,” Lee said in a press conference after the rate decision.

That squashed some of speculations in the market that the BOK could soon be following central banks in Europe and Canada in taking a hawkish turn.

The Bank of Canada raised its policy rate for the first time in nearly seven years on Wednesday, while European Central Bank chief Mario Draghi in June opened door to tweaks in the bank’s ultra-easy money policy by saying that deflationary forces had been replaced by inflationary ones.

The Federal Reserve has already raised rates twice this year and is expected to tighten again before year-end.

“For now, talks of policy tightening seems to be only with some advanced nations,” said Kim Jina, a fixed-income analyst at IBK Securities.

“Lee’s comments today weren’t as hawkish.”

Seoul stocks rose 1.19 percent, while September futures on three-year treasury bonds ticked up 0.08 points to trade at 109.24 as of 0448 GMT. The won benefited from a broadly weak dollar as well as on the economic upgrade.


Lee said the bank hasn’t taken into account the impact of the 11.2 trillion won ($9.71 billion) extra budget the government proposed in June, as the bill has not been approved by the parliament yet.

After five years of accommodative policy, most analysts expect the BOK to start pushing borrowing costs up next year in a more gradual approach to exiting low rates than some of its counterparts in advanced economies.

Indeed, while exports grew at a double-digit rate for the sixth month in a row in June, lukewarm jobs growth and subdued private consumption argue against a rush to tighten rates.

South Korea’s consumer price inflation has cooled from the peak of 2.2 percent in March to 1.9 percent in June, slightly below the BOK’s target of 2 percent.

“There is no sign that the recovery in the economy is feeding through to an increase in price pressures, which means Korea will be in little hurry to raise rates,” said Krystal Tan, economist at Capital Economics, in a report.

Reporting by Cynthia Kim and Christine Kim; Editing by Shri Navaratnam

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below