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BOK board members concerned over slowing economic growth: minutes

Economy 17:01 June 18, 2019

SEOUL, June 18 (Yonhap) -- Several members of the Bank of Korea's rate-setting board expressed woes over the possibility of slower-than-expected economic growth during the remainder of the year, also casting doubt over the central bank's growth outlook of 2.5 percent for the year, minutes of its latest meeting showed Tuesday.

In the Monetary Policy Board meeting held on May 31, one of the board members noted the possibility of facility investment and exports falling short of earlier expectations in the future, according to the released minutes.

The seven-member board again kept the policy rate frozen at 1.75 percent, but the meeting saw its first minority opinion calling for a rate cut in six months.

"Also, the same board member noted the inflation forecast for the year appears to be based on assumptions of several factors that will pull up prices by a greater margin than the actual trend in recent price movements, and expressed the view that the board must keep in mind the possibility that some of these assumptions may not be realized," the minutes said.

In the photo taken on May 31, 2019, Bank of Korea Gov. Lee Ju-yeol (C) chairs the rate-setting meeting of the bank's seven-member Monetary Policy Board held at the central bank's headquarters building in Seoul. (Yonhap)

The country's consumer prices have stayed well below the central bank's target of 2 percent at least since 2016. Since the beginning of the year, consumer prices have risen by less than 1 percent for five consecutive months.

Another board member agreed that the central bank may be too optimistic about economic conditions.

"Another board member noted that the bank's forecast that our economy will see a technical recovery in the second quarter and continue on an upward trend in the second half is based on expectations of increased fiscal spending and a recovery in the semiconductor market, but expressed the opinion that such an outlook seems too optimistic," the minutes said.

The country's exports have dipped for six consecutive months since December, partly led by a larger than expected drop in outbound shipments of semiconductors, which plunged 30 percent on-year in May alone.

South Korea's economy unexpectedly contracted 0.4 percent from three months earlier in the first quarter, marking the worst performance in a decade.

"(The member) expressed the view that to reach 2.5 percent economic growth as forecast by the bank, the economy must grow about 3 percent in the remaining three quarters but that such growth may not be easy unless the unprecedented boom in the semiconductor market reemerges."

The central bank slashed its growth outlook to 2.5 percent in April, down 0.1 percentage point from its forecast in January.

The bank is set to release its revised growth forecast in mid-July when the monetary policy board will also hold its next rate-setting meeting.

Apparently following such strong calls for steps to boost the economy from the board members, as well as the escalating trade dispute between the United States and China, BOK Gov. Lee Ju-yeol recently hinted at a possible rate cut down the road.

"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," he said last week.


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