Majority of bank of Korea board voted to hold rate
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