November 6, 2018 / 3:08 AM / 8 days ago

South Korea govt think tank calls for central bank to refrain from rate hikes

A man gets on a bicycle in front of the Bank of Korea in Seoul August 9, 2012. REUTERS/Kim Hong-Ji

SEOUL (Reuters) - South Korea’s top government think tank on Tuesday called on the central bank to maintain accommodative monetary policy through to next year, saying inflation would remain low given slowing domestic demand and a sluggish job market.

“(The central bank) needs to maintain the monetary policy at the current, easy stance, given that consumer prices would be difficult to rise fast amid the slowing domestic demand and sluggish employment,” the Korea Development Institute (KDI) said in a scheduled report.

The Bank of Korea’s governor has signaled on several occasions recently it could raise the benchmark interest rate as early as its Nov. 30 meeting to cool the property market and slow consumer borrowing.

The KDI said in the report, released to revise its 2018-2019 economic forecasts, that rising property prices in the capital area needed to be dealt with through more direct, targeted measures rather than broad-based interest rate hikes.

In the report, the KDI cut its forecasts for South Korea’s economic growth for this and next to 2.7 percent and 2.6 percent, respectively, from 2.9 percent and 2.7 percent predicted in May.

It also cut this year’s inflation forecast to 1.6 percent from 1.7 percent previous, while maintaining next year’s inflation projection at 1.6 percent.

Reporting by Choonsik Yoo; Editing by Sam Holmes

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