South Korean finance chiefs fuel hopes for cut in interest rates

South Korea's new finance minister and its central bank governor both highlighted weakness in Asia's fourth-largest economy yesterday, adding to market expectations that an interest rate cut could be in the offing.

While Finance Minister Choi Kyung-hwan did not mention interest rates in his inauguration speech and shut the door on the prospect for a supplementary budget, he promised a bigger budget next year, citing weakened demand and sluggish output.

Bank of Korea governor Lee Ju-yeol said his assessment of the economy in April, when he said rates should rise if the economy kept to its projected growth path, had been too optimistic.

"You can signal a move 23 months prior, but if something unexpected happens in even a month's time, that could change policy," Lee told reporters on the sidelines of an event.

"Right now the market sees a rate cut happening no matter what, even if the current growth rate doesn't warrant a cut, and if the central bank doesn't lower interest rates, that could hurt markets and sentiment," said Park Sang-hyun, the chief economist at HI Investment & Securities.

"Choi has been around for a long time and judging by his experience he will have more propelling power in terms of policy," Park said of the veteran lawmaker.