Bloomberg News

South Korea to Set Record With Freeze on Interest Rate, Yun Says

May 15, 2012

Pedestrians walk in front of the Bank of Korea headquarters in Seoul, South Korea. All of the BOK’s seven board members voted last week to keep the benchmark seven-day repurchase rate  at 3.25 percent. Photographer: Jean Chung/Bloomberg

Pedestrians walk in front of the Bank of Korea headquarters in Seoul, South Korea. All of the BOK’s seven board members voted last week to keep the benchmark seven-day repurchase rate at 3.25 percent. Photographer: Jean Chung/Bloomberg

The Bank of Korea is likely to keep the key interest rate unchanged this year, setting a record for the longest stretch that the benchmark has stayed on hold, an adviser to the government said.

“Inflation pressures will bar a rate cut while the slower economic growth path will prevent them from raising,’ said Yun Chang Hyun, who as president of the Korea Institute of Finance advises the central bank, finance ministry and financial regulators. He spoke in a May 11 interview in Seoul.

South Korea held off from altering borrowing costs for an 11th month last week. The longest pause since the central bank began setting a rate in 1999 was the 17-month stretch between February 2009 and July 2010, when the benchmark was at a record low of 2 percent to counter the effects of the global financial crisis.

The export-driven economy will grow 3.4 percent this year, Yun said. That is less than his institute’s October forecast of 3.7 percent.

All of the BOK’s seven board members voted last week to keep the benchmark seven-day repurchase rate at 3.25 percent.

‘‘The next move will be a hike and they will raise rates only when they feel confident that the Europe crisis really hit the bottom,” Yun said.

To contact the reporters on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net; Seonjin Cha in Seoul at scha2@bloomberg.net

To contact the editors responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net; Paul Panckhurst at ppanckhurst@bloomberg.net


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus