November 13, 2014 / 2:16 AM / 6 years ago

REFILE-UPDATE 2-Bank of Korea keeps policy steady in Nov, dims rate cut outlook

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* Base rate kept at 2.00 pct (Reuters poll: 2.00 pct)

* Analysts split between raise and cut in next move

* BOK concerned over yen weakness hurting exports

* Governor confident over exports, economic growth

By Christine Kim and Choonsik Yoo

SEOUL, Nov 13 (Reuters) - South Korea’s central bank held interest rates steady on Thursday in its first unanimous vote since June, and sent no signal of a further policy easing soon - dampening expectations among investors for an additional rate cut.

Bank of Korea Governor Lee Ju-yeol said an accelerated decline in the yen would be a cause for concern, but noted that weak sentiment among South Korean consumers and companies was mostly due to overblown concerns about the global economy.

The Bank of Korea’s monetary policy committee left its base rate unchanged at 2.00 percent after it cut rates in October, in line with expectations from 33 analysts who unanimously agreed rates would be kept on hold.

“Our exports have fared well so far but if the yen weakens further (against the dollar) then it will become a situation for concern. We are already worried about the chance that this will happen,” Lee told the news conference.

He added, however, that yen weakness following the Bank of Japan’s new stimulus effort could not be addressed by South Korean interest rates: “We do not make monetary policy decisions specifically targeting exchange rates.”


The Bank of Korea has already cut interest rates twice this year, in August and October, in moves widely seen as giving in to pressure from the government to boost its growth policies.

“Today’s remarks from Lee were not significant enough to change my view, but he made it clear that future policy will be mostly dependent on data, especially data on the global economy,” said Kong Dong-rak, a fixed-income analyst at Hanwha Securities.

Kong was among 14 analysts in a Reuters poll who forecast the central bank would cut rates in its next policy move, opposed to 10 who saw a hike.

Stimulus measures by the government and the central bank, including plans to boost public spending and cut interest rates, have encouraged consumers to spend, with bank lending to households rising by the largest amount on record in October.

The Bank of Korea lowered next year’s growth forecast to 3.5 percent from 3.8 percent in October, still close to the economy’s potential growth rate, which the central bank has said is somewhere in the high 3-percent range.

Editing by Eric Meijer

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