The Bank of Korea held off from increasing borrowing costs for a fourth straight month amid concern that a global slowdown will weigh on the nation’s growth and a moderation in inflation from a three-year high, Bloomberg News reported.
The bank’s governer Kim Choong Soo and his board held the benchmark seven-day repurchase rate at 3.25%, the central bank said. The Asian policy makers are boosting efforts to defend their economies from weakening growth in the U.S. and Europe with Indonesia’s central bank unexpectedly cutting borrowing costs and the Philippines launching a stimulus plan this week.
The Bank of Korea may need to stop further rate increases into 2012 at supporting the expansion takes precedence over taming inflation, said the economist Yoon Yeo Sam. “I see not rate change well into next year and if things get really ugly, even a rate cut is possible to boost the economy,” said Yoon, a fixed-income analyst at Daewoo Securities Co in Seoul. The won rose 0.8% to 1,157.95 per dollar as of 10:11 am, in Seoul.
The benchmark Kospi index (KOSPI) gained 1.1%. The currency lost more than 8% over the past three months, Asia’s second-worst performer, fueling inflationary pressure by increasing import costs.
A deepening European debt crisis and a struggling US recovery has prompted emerging market nations to opt to support their economies rather than combat inflation. Brazil, Turkey, Russia and Pakistan have cut borrowing costs in 2011.
Inflation moderates
The consumer-price increases in South Korea eased to 4.3% from a year earlier last month, after a 5.3% rise in August. The latest inflation figure remains above the Bank of Korea’s target ceiling of 4%.
South Korea’s consumer predict that prices hikes will accelerate, with the expected inflation rate over the next 12 months at 4.3% in September, faster than 4.2% in the previous month and the highest since November 2008, a survey by the Bank of Korea revealed.
The Bank of Korea increased interest rates for the third time this year in June to fight inflation. The Bank of Korea is the central bank of South Korea and issuer of South Korean won. The Bank's primary purpose is price stability. For that, the Bank targets inflation. The 2010–12 target is consumer price inflation of 3.0 ± 1%.
