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BOK chief hints at rate cut amid heightened uncertainty

All Headlines 08:00 June 12, 2019

By Byun Duk-kun

SEOUL, June 12 (Yonhap) -- In what could be a drastic shift from his earlier commitment to standing pat, the head of South Korea's central bank on Wednesday hinted at an easing policy as the trade tension between the United States and China underscores the woes of Asia's fourth-largest economy.

Bank of Korea Gov. Lee Ju-yeol had ruled out the possibility of a rate cut in the past few months sticking to the belief that the country's economy will gather pace during the second half of the year, which many claim is too optimistic in the face of the flaring-up trade frictions between the world's top two economies.

In a speech marking the 69th anniversary of the bank's foundation, BOK Gov. Lee stressed the need for what he called "appropriate measures" to deal with changes in economic conditions.

"As external uncertainties have increased due to the U.S.-China trade dispute and slump in the semiconductor market, we must take appropriate measures to accommodate changes in economic conditions while closely monitoring the direction of changes and their impact," Lee said.

Since the start of the year, the economy has been showing signs of sluggishness amid a slump in exports and business spending, he said.

"The local economy is expected to expand on increased government spending and the slump in exports and investment removed down the road, but it appears that uncertainties on our path to growth have become greater," he said.

In this photo, taken May 31, 2019, Bank of Korea Gov. Lee Ju-yeol holds a press conference in Seoul to explain the outcome of the bank's monetary policy board meeting that decided to keep the key rate frozen at 1.75 percent for May. (Yonhap)

His remarks are an about-face from what he had assessed. Previously, even last month, the BOK chief said a potential rate cut was not on the table as the economic growth would gather steam.

Two weeks earlier, the central bank decided to keep the policy rate frozen at 1.75 percent in its first split vote at least since November when the board raised the benchmark rate by 25 basis points.

The central bank is scheduled to hold its next rate-setting meeting in mid-July.

bdk@yna.co.kr
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