South Korean cbank keeps key rate at 2.5pc
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