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(LEAD) BOK chief strongly hints at rate cut following U.S.'s unexpected move

All News 16:28 March 04, 2020

(ATTN: UPDATES with additional background in paras 10-12; CHANGES attribution for BOK chief's remarks in 2nd para)
By Byun Duk-kun

SEOUL, March 4 (Yonhap) -- South Korea's central bank chief on Wednesday strongly hinted at a possible rate reduction down the road, hours after the U.S. Federal Reserve delivered an unexpected rate reduction to deal with the spread of the new coronavirus in the world's largest economy.

"As the result of the steps taken by the U.S. Fed, the United States' policy rate (1.0 percent-1.25 percent) has been lowered to a level similar to that of the country's policy rate (at 1.25 percent)," Bank of Korea (BOK) Gov. Lee Ju-yeol said in an emergency meeting with BOK officials to review the impact of the U.S. rate decision.

"There is a need to adequately consider such a change in the policy environment when operating the country's monetary policy in the future," the top central banker said.

In this photo provided by the Bank of Korea (BOK), BOK Gov. Lee Ju-yeol bangs his gavel at the start of a BOK monetary policy board meeting at the South Korean central bank in Seoul on Feb. 27, 2020. (PHOTO NOT FOR SALE) (Yonhap)

In its emergency meeting, held Tuesday (U.S. time), the Fed voted unanimously to cut the key rate by 50 basis points, marking its first emergency rate reduction since 2008.

The U.S. central bank had been expected to cut the base rate at its upcoming Federal Open Market Committee (FOMC) meeting, slated for March 17-18.

Many analysts here believe the Fed may again trim the key rate at the FOMC meeting.

The unexpected rate cut by the U.S. came after the BOK kept its own base rate at the record low on Feb. 27, insisting that what it called "microeconomic measures" may be more effective in dealing with the economic fallout from the virus outbreak for now.

Lee again defended the bank's decision to hold the key rate steady.

"Since there are limits in minimizing the damage from the coronavirus outbreak only with monetary policies, we must consider coordination with government policies in the process," he was quoted as saying.

Earlier in the day, the Seoul government said it will seek 11.7 trillion won (US$9.86 billion) in extra budget to cope with the economic fallout from the virus outbreak and boost economic growth.

Asia's fourth-largest economy was earlier estimated to expand 2.3 percent this year, rebounding from an estimated 2 percent on-year increase in 2019 that marked the slowest growth in a decade.

The BOK, however, has slashed its growth outlook to 2.1 percent.

The BOK chief vowed efforts to help stabilize local markets, noting market fluctuations may expand for some time due to the spread of COVID-19.

South Korea has so far reported over 5,300 infection cases, with 33 deaths.

bdk@yna.co.kr
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