Ma­jor­ity of bank of Korea board voted to hold rate

The Pak Banker - - Front Page -

SEOUL: A ma­jor­ity of the Bank of Korea's board voted to leave the nation's bench­mark in­ter­est rate un­changed in Oc­to­ber be­fore the mon­e­tary author­ity raised bor­row­ing costs this month for the sec­ond time in 2010.

Five of six board mem­bers opted to keep the rate at 2.25 per­cent, cit­ing con­cern that cur­rency volatil­ity had clouded the ex­port out­look, ac­cord­ing to the min­utes of the Oct. 14 pol­icy meet­ing re­leased by the cen­tral bank to­day. One called for a 0.25 per­cent­age­point in­crease to damp price pres­sures.

"A cau­tious ap­proach is needed, given our re­liance on ex­ports for growth, when ma­jor coun­tries com­pete to un­der­value their cur­ren­cies," one uniden­ti­fied mem­ber said. "But we need to send a sig­nal that we will con­tinue to nor­mal­ize in­ter­est rates."

South Korea is striv­ing to con­tain price pres­sures while at the same time avoid ex­change-rate gains. Gover­nor Kim Choong Soo and the pol­icy board raised bor­row­ing costs by a quar­ter per­cent­age point to 2.5 per­cent in Novem­ber af­ter in­fla­tion breached the cen­tral bank's 4 per­cent ceil­ing.

The won has risen by 2.8 per­cent against the dol­lar in the past three months, the third-biggest gainer in Asia. The cur­rency fell 0.6 per­cent to 1,159.25 at the 3 p.m. close in Seoul. The bench­mark Kospi stock in­dex climbed 0.5 per­cent.

Con­sumer price growth may have eased to 3.7 per­cent this month from a 20-month high of 4.1 per­cent in Oc­to­ber, ac­cord­ing to the me­dian es­ti­mate of 10 econ­o­mists sur­veyed by Bloomberg News.

The cen­tral bank is tar­get­ing in­fla­tion of 2 per­cent to 4 per­cent on av­er­age through 2012. The bank dropped its pledge to keep mon­e­tary pol­icy "ac­com­moda­tive" af­ter the rate in­crease on Nov. 16. -PB News

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