May 24, 2018 / 1:58 AM / a month ago

TEXT-Bank of Korea statement on policy decision

SEOUL, May 24 (Reuters) - Following is the full text of the statements released by the Bank of Korea in English after the central bank held its key interest rate steady at 1.50 percent on Thursday, as expected, as it monitors the effects of its November hike.

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MONETARY POLICY DECISION

“The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.50 percent for the inter-meeting period.”

“Based on currently available information the Board considers that the global economy has continued its robust growth. Financial markets in some emerging market economies with weak external soundness have shown instability, as capital outflows from them have increased. Looking ahead the Board sees global economic growth as likely to be affected by factors such as the pace of monetary policy normalization in major countries, the movements toward spreading trade protectionism, and the directions of the US government’s economic policies.”

“The Board judges that the solid trend of domestic economic growth has continued, as consumption and exports have shown favorable movements although facilities investment has slowed somewhat. Employment conditions have been sluggish, with the extent of increase in the number of persons employed having remained at a low level. Going forward the Board expects domestic economic growth to be generally consistent with the path projected in April. It anticipates that investment will slow but that the trend of steady increase in consumption will continue, and that exports will also sustain their favorable movements thanks to the buoyancy of the global economy.”

“Consumer price inflation has risen to the mid-1 percent level, due mainly to increases in the prices of agricultural products. Core inflation (with food and energy product prices excluded from the CPI) has also been in the mid-1 percent range, and the rate of inflation expected by the general public has remained at the mid-2 percent level. Looking ahead it is forecast that consumer price inflation, after remaining in the mid-1 percent range for some time, will pick up and gradually approach the target level from the second half of this year. Core inflation will also gradually rise.”

“The domestic financial markets have been generally stable. Although long-term market interest rates have increased, under the effects chiefly of rising government bond yields in major countries, the Korean won-US dollar exchange rate has fluctuated within a relatively narrow range, in line mainly with the global strengthening of the US dollar and with the decline in risks related to North Korea. Household lending has sustained its higher rate of expansion than in past years, led by unsecured loans. The paces of increase in housing sales prices have slowed, especially in some parts of Seoul and its surrounding areas.”

“Looking ahead, the Board will conduct monetary policy so as to ensure that the recovery of economic growth continues and consumer price inflation can be stabilized at the target level over a medium-term horizon, while paying attention to financial stability. As it is forecast that inflationary pressures on the demand side will not be high for the time being, while the domestic economy is expected to continue its solid growth, the Board will maintain its accommodative monetary policy stance. In this process it will judge carefully whether it is necessary to adjust its accommodative monetary policy stance further, while closely checking future economic growth and inflation trends. It will also carefully monitor any changes in the monetary policies of major countries, conditions related to trade with major countries, the trend of increase in household debt, and geopolitical risks.”

CURRENT ECONOMIC DEVELOPMENTS IN KOREA

“It is judged that the Korean economy has sustained its trend of solid growth. Exports are continuing to increase briskly, on the back of the ongoing growth in the global economy, and private consumption is also maintaining a steady increase. The growth in facilities investment has however slowed somewhat from its high rate at the beginning of the year, while construction investment remains in its phase of adjustment.”

“Going forward domestic economic growth is expected to be generally in accord with the past forecast in April, as consumption expands steadily and exports sustain their robust growth, although the increase in investment is foreseen slowing. Factors such as the strengthening global economic growth, investments in Korea’s trading environment vis-à-vis China, and additional fiscal spending are among the potential upside risks to growth, while accelerated monetary policy normalizations in major countries, a strengthening of protectionist trade policies and delayed improvements in employment conditions are among the downside ones. Consumer price inflation is expected to gradually pick up, due to the recovery in domestic demand and to the impact of the rising oil prices. It is forecast that the current account will remain in surplus.” (Reporting by Cynthia Kim and Christine Kim Editing by)

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