2010년 6월 10일 목요일

BOK freezes key rate, warns of inflation risks

The chief of the South Korean central bank expressed confidence about economic recovery on Thursday but warned against inflationary pressure down the road, signaling that a rate hike is in the offing, Yonhap News reported.

 Bank of Korea (BOK) Gov. Kim Choong-soo made the remarks in a news conference after the central bank froze its key interest rate at a record low of 2 percent for the 16th straight month, amid economic uncertainty stemming from Europe's debt crisis.



"Upward pressure on inflation is expected to gradually mount in the second half as the economy recovery will likely pick up and public utilities charges are expected to rise," Kim said.

 Earlier, the BOK said in a statement that it will manage its monetary policy in a way that the economy can keep its solid growth on the basis of price stability, hinting that the central bank is more tilted toward a potential rate hike from the previous month.

 His remarks came as the Korean economy is recovering on the back of improving domestic demand and robust exports. But Europe's sovereign debt crisis has heightened economic uncertainty, raising concerns that it will curb the global economic recovery.

 After presiding over the G20 ministerial meeting during the weekend, South Korean Finance Minister Yoon Jeung-hyun said eurozone debt concerns are causing some countries to delay the timing of their exit strategies.

   The governor said downside risks from the eurozone debt crisis should not be underestimated, but the Korean economy is likely to keep its upward momentum despite the crisis.

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