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Full text of BOK's statement on monetary policy decision for June

All News 11:21 June 09, 2016

SEOUL, June 9 (Yonhap) -- Following is the full text of the Bank of Korea's statement on its monetary policy decision for June. The central bank's monetary policy board voted Thursday to slash the key rate by 25 basis points to a new record low of 1.25 percent for June.

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The Monetary Policy Committee of the Bank of Korea decided today to lower the Base Rate by 25 basis points, from 1.50% to 1.25%.

Based on currently available information the Board considers that the US economy has appeared to be emerging from its temporary slowdown. The improvements in the euro area, although weak, have continued, and the Chinese economy has maintained its moderate growth. The Board forecasts that the global economy will maintain its recovery going forward, albeit at a moderate pace, led by advanced economies such as the US, but judges that it will be affected by factors including the monetary policy normalization by the US Federal Reserve, financial and economic conditions in emerging market countries, and international oil price movements.

Looking at the Korean economy, exports have continued their trend of decline and the improvements in domestic demand activities such as consumption have weakened, while the sentiments of economic agents have also been sluggish. On the employment front, while the pace of increase in the number of persons employed slowed somewhat in April, the employment-to-population ratio and the unemployment rate maintained the same levels as in April of last year. The Board forecasts that the domestic economy will sustain its trend of modest growth going forward, but in view of external economic conditions judges that the downside risks to the domestic growth path forecast made in April have expanded.

Consumer price inflation fell from 1.0% the month before to 0.8% in May, owing chiefly to a slowdown in the extents of increase in agricultural product prices. Core inflation excluding agricultural and petroleum product prices also declined to 1.6%, from 1.8% in April. Looking ahead the Board forecasts that consumer price inflation will continue at a low level, under the influence of the low oil prices for example. In the housing market, sales and leasehold deposit prices showed low rates of increase.

In the domestic financial markets since May, stock prices have risen after having previously fallen, in reflection mainly of global stock market movements, and long-term market interest rates have declined, influenced mostly by the sluggishness of some economic indicators. The Korean won has appreciated against the US dollar after having depreciated substantially against it, affected largely by changes in expectations of a policy rate hike by the US Federal Reserve. The won has meanwhile depreciated against the Japanese yen. Bank household lending has sustained a trend of increase at a level exceeding that of recent years, led by mortgage loans.

Looking ahead, the Board will conduct monetary policy so as to ensure that the recovery of economic growth continues and price stability is maintained over a medium-term horizon, while paying greater attention to financial stability. In this process it will closely monitor any changes in the monetary policies of major countries, capital flow movements, the progress of corporate restructuring, and the trend of increase in household debt.
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