(Repeats at item first published on Tuesday ahead of monetary
policy committee meeting)
(For related story, double-click [ID:nTOE69100L])
By Yoo Choonsik
SEOUL Oct 12 South Korea's central bank looks
set to raise interest rates this week to curb inflation
expectations with global currency tensions, but an uncertain
global economy and the rising won may prompt it to pause
A majority of economists surveyed by Reuters forecast that
the Bank of Korea would raise its policy rate for the second time
in four months on Thursday by 25 basis points to 2.5 percent, but
would then pause.
Following are a set of financial graphics describing the
economic factors feeding into the monetary policy debate.
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For Reuters poll [ID:nTOE69900M]
INFLATION, GDP, EMPLOYMENT HIGHER
Annual consumer inflation in September rose 1 percentage
point to 3.6 percent, a 17-month high, from August. Most of the
rise was accounted for by increases in the price of farm produce
following bad weather, but domestic demand is picking up.
Employment growth is quickening and wage increases are
running at around 6 percent, laying the ground for a rise in
South Korea has been outpacing the average performance of the
Organisation for Economic Co-operation and Development member
economies for six successive quarters and is headed for its
fastest yearly growth in eight years.
HOUSEHOLD CREDIT GROWING
South Korean policymakers are concerned that if current low
interest rates are maintained for too long, it could encourage a
risky increase in already high household debt.
Household credit has been expanding for 11 consecutive years,
including through the global financial crisis. It kept rising for
the first half of this year and looks certain to reach more than
70 percent of the country's annual gross domestic product.
Raising interest rates would show authorities are committed
to containing credit growth, sources at the central bank and the
government have said.
WON HEADING HIGHER
South Korean central bank officials have in the past played
down any immediate impact domestic interest rate policy may have
on the won's value.
But global tensions over a tide of capital flooding into
emerging markets to seek higher yields than those available in
the developed world is top of the international agenda.
So the central bank could be concerned a further tightening
of policy could exacerbate the inflows of capital into its
markets and thus push the won yet higher against the dollar.
Governments are striving to keep their currencies from
appreciating too much as advanced economies maintain loose
monetary policy, or are even moving to further ease policy to
revive their recoveries.
The won has lagged behind its regional peers this year, but
in September posted its fastest monthly gain in a year. It gained
5 percent in September and is close to reaching its highest level
in two years.
(Graphics by Catherine Trevethan; Editing by Neil Fullick)