S.Korea c.bank to take action if yield curve steepens

SEOUL, March 31 Sun Mar 30, 2014 11:00pm EDT

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SEOUL, March 31 (Reuters) - South Korea's central bank will try to calm markets through open market operations should the local yield curve steepen in response to policy tightening in the United States, a senior official said on Monday.

"If needed, we will use open market operations, like purchasing long-term bonds or other measures," Kim Jun-il, a deputy governor and chief economist of the Bank of Korea, told reporters while explaining the bank's policy report.

The Bank of Korea said in its monetary and credit policy report submitted to parliament on Monday it would take measures aimed at preventing the local yield curve from steepening excessively in response to overseas factors.

It was the most explicit comment on the expected impact that a U.S. policy tightening may have on the local financial markets, indicating the Bank of Korea is concerned the most about a possibly sharp rise in bond yields.

The central bank also said in the report that it would keep a close eye on local inflation staying at unusually low levels for an extended period, although it expects inflation to pick up soon. (Reporting by Christine Kim; Editing by Choonsik Yoo and Jacqueline Wong)

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