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BOK likely to freeze key rate for 11th month in April

All Headlines 10:54 April 07, 2014

SEOUL, April 7 (Yonhap) -- South Korea's central bank is expected to freeze the key interest rate for the 11th straight month for April at the first rate-setting meeting with a new chief at the helm amid economic recovery, a poll showed Monday.

All 13 analysts surveyed by Yonhap Infomax, the financial news arm of Yonhap News Agency, forecast that the Bank of Korea (BOK) will leave the benchmark seven-day repo rate unchanged at 2.5 percent on Thursday.

Gov. Lee Ju-yeol, a former senior deputy governor at the BOK, replaced his predecessor Kim Choong-soo on April 1, vowing to operate the monetary policy in a consistent and predictable manner.

Lee said at his confirmation hearing that he will seek to strike a balance between keeping prices stable and supporting the economy that is on a low growth trend.

Analysts said that the policy rate is expected to remain unchanged this month as there seems to be no reason to change the monetary policy stance, given the pace of the economic recovery and low inflation.

In the poll, six analysts said that the BOK is likely to leave the benchmark rate unchanged until the end of this year.

Four experts forecast the bank to raise the borrowing costs later this year, given that inflation will pick up down the road, while the remaining three analysts argued for a rate cut to support the growth.

"The local economy is improving, but inflationary pressure is far below the BOK's target band, reducing the need to change the monetary policy," said Park Jong-yeon, an analyst at Woori Investment & Securities Co.

The central bank said that the Korean economy is forecast to grow 3.8 percent this year after advancing 3 percent last year. The data on the 2013 growth was revised up due mainly to changes in calculation methodology, but the local economy is on the recovery track on improving exports and domestic demand, analysts say.

The global economy was showing mixed signs of recovery. The U.S. Federal Reserve is tapering its monetary stimulus bond purchases although concerns about China's economic slowdown persist.

Despite signs of economic recovery at the home front, Korea's inflationary pressure still remained tame. The country's consumer prices grew 1.3 percent in March from a year earlier, quickening from a 1 percent on-year gain in February but running below the BOK's 2.5-3.5 percent inflation target band for the 22nd straight month in March.


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