South Korean cbank keeps key rate at 2.5pc

The Pak Banker - - Company& -

SEOUL: South Korea's cen­tral bank kept its key in­ter­est rate on hold Thurs­day af­ter in­fla­tion eased sharply in Novem­ber but cau­tioned that the coun­try's strong econ­omy and ris­ing global costs for raw ma­te­ri­als would push con­sumer prices higher again. The Bank of Korea an­nounced that it de­cided to leave the bench­mark seven-day re­pur­chase rate at 2.5 per­cent dur­ing a monthly mon­e­tary pol­icy meet­ing. The bank last month raised the rate from 2.25 per­cent, which was the sec­ond hike in four months.

South Korea's in­fla­tion rate hit 4.1 per­cent in Oc­to­ber. The year-on-year in­crease in con­sumer prices was slightly out­side the cen­tral bank's com­fort zone. The bank's in­fla­tion tar­get is 3 per­cent, though that in­cludes what it calls a "tol­er­ance range" of plus or mi­nus 1 per­cent­age point. In­fla­tion dropped to 3.3 per­cent in Novem­ber. The bank's mon­e­tary pol­icy com­mit­tee wel­comed the slow­down, but warned the trend is for ris­ing prices to con­tinue.

"Con­sumer price in­fla­tion has greatly de­creased due to the sta­bil­ity of veg­etable prices," the com­mit­tee said in a state­ment. "How­ever, up­ward pres­sures are ex­pected to con­tinue, be­ing as­so­ci­ated with the con­tin­ued up­swing in ac­tiv­ity and the runup in in­ter­na­tional raw ma­te­rial prices." South Korea's bench­mark stock in­dex ral­lied 1.7 per­cent to close at 1,988.96, its high­est fin­ish in three years, amid broad gains in re­gional mar­kets.

The bank's pol­icy mak­ers also expressed op­ti­mism about South Korea's econ­omy, say­ing they ex­pect it to show con­tin­ued strength "even in the pres­ence of ex­ter­nal risk" in­clud­ing global fi­nan­cial mar­ket turmoil caused by sov­er­eign debt prob­lems in Europe. South Korea, Asia's fourth-largest econ­omy, has re­cov­ered strongly from the global fi­nan­cial cri­sis that be­gan in 2008. -PB News

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