South Korea holds key bank rate as strong won threatens growth
The Bank of Korea left its key rate unchanged as governor Lee Ju-yeol seeks to spur an economy that Finance Minister nominee Choi Kyung-hwan warned faces increasing downside risks.
The Bank of Korea left its key rate unchanged as governor Lee Ju-yeol seeks to spur an economy that Finance Minister nominee Choi Kyung-hwan warned faces increasing downside risks.
The central bank held the seven-day repurchase rate at 2.5 per cent for a 14th consecutive month, it said in a statement in Seoul yesterday.
A rise in the won to near six-year highs threatens to dampen growth that is showing signs of sputtering, with factory output unexpectedly shrinking in May, exports growing at half the forecast pace in June and manufacturers' confidence falling in July to the lowest this year. Samsung Electronics - the country's biggest exporter - cited a strong currency and a drop in its smartphone market share for disappointing earnings.
"A rate cut may be put on the table at the bank as a possible option at any time," said Lee Jae-hyung, a fixed-income analyst at Tongyang Securities in Seoul. "The economy will need more policy support if domestic demand remains sluggish."
The government may need to cut its growth forecast of 3.9 per cent for this year, Choi said in parliament this week. South Korea needs to "swiftly" execute fresh policies to spur the economy, he said.
Choi pledged this week to look into "all possible steps" across fiscal and monetary policies and said he would announce a package of macro- and micro-policies to support growth soon.
