BOK May Freeze Key Rate in Jan.
By Kim Jae-won
Staff Reporter
The central bank is expected to leave its key interest rate unchanged at the record low level of 2 percent this month for the 11th straight month, according to analysts. The BOK has frozen its policy rate since March 2008, boosting Korean economy to get out from recession.
People are turning their eyes to a six-member Monetary Policy Committee meeting, chaired by Governor Lee Seong-tae, scheduled for Friday.
Governor Lee himself indicated that the central bank will keep the key rate for a while, saying economic climate is still uncertain.
“Economic circumstances are still unpredictable. We will manage key rate to help economic recovery,” said Lee at his new year’s address recently.
Some analysts forecast that a rate hike will not come this month, but said it will probably come in the first quarter as indicators show it is time to raise key rate.
“I think the BOK will not raise key interest rate this month, but will give signal to raise it. I expect the time will be February or March,” said, Kim Sang-hoon, economist of Hana Institute of Finance.
“Indicators on industrial production, export, and consumption show that it is time to raise key rate. But the BOK may consider other elements, such as cooperation with government and regional elections. So, they may keep this time, but give signals instead,” Kim added.
Others agreed with Kim that the BOK will keep the rate this month, but forecast that a rate hike will come sooner or later.
“I think the BOK will keep the rate. The Korean economy is picking up, but there are still many unstable elements in the global economy, such as Dubai's debt problem, mortgage market of U.S.,'' Chang Min, a chief economist at the Korea Institute of Finance, told The Korea Times.
“The BOK will definitely raise key rate this year, and the time may be in the second quarter. For BOK, it is safe to watch the market for more some time, and raise it when all the time is ready,” Chang added.
The economist pointed out Governor Lee’s retirement can affect the key rate.
“The retirement of Governor Lee can be another element. He will retire in April, so it is possible that he raise the key rate, and retire.”