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'Uncertainty growing over economy'
Bank of Korea (BOK) Governor Lee Ju-yeol speaks during a press meeting at the central bank's headquarters in Seoul, Tuesday. Courtesy of BOK
By Lee Kyung-min
By Lee Kyung-min
Bank of Korea Governor Lee Ju-yeol has become more downbeat about the future course of the Korean economy, citing growing uncertainty caused by the U.S.-China trade feud and the prolonged slump of the semiconductor industry.
“The global trade environment increasingly points to a further, prolonged deterioration due to the escalation of the U.S.-China trade dispute, unlike the market expectation that they would shortly find a breakthrough,” Lee told reporters Tuesday.
Such an unfavorable development poses a greater risk to Asia's fourth-largest economy already strained by low growth and low inflation, compounded by a delayed recovery of export growth including chip sales, he noted.
“Uncertainty is growing over the prospect of the Korean economy, as an increasingly dominant view is that the recovery of semiconductor exports ― the growth driver of the country ― will be delayed further than previously expected,” Lee said at the press meeting at the bank in Seoul.
The notably downbeat assessment is in line with the market view that the BOK will lower the key interest rate by 25 basis points in the next rate-setting meeting scheduled for July 18.
Lee said he is well aware of the financial market expecting a rate cut following his June 12 remarks made at the 69th anniversary of the central bank.
“We will determine the scope and the extent of the monetary policy after taking into consideration factors including consumer prices, macroeconomic conditions as well as financial stability concerns,” he said.
The central bank has kept the benchmark interest rate untouched at 1.75 percent after it raised the key rate by 25 basis points in November 2018, the first rate change in a year.
“At the time, we clearly explained that the economy will be able to withstand a rate hike, given the country was expected to grow at a rate that would not veer too far off its potential growth rate,” he said.
The remarks came in response to a criticism that the central bank should promptly help boost the stagnant economy by lowering the interest rate.
“The economy is sluggish, so the rate should be hiked? That is too simple-minded a thought process. A range of factors should be taken into consideration.”
Lee made it clear that constant communication will continue to help financial market participants' expectations.
“Financial market developments occur before, during and after a BOK rate change. Consistent communication will help with their next course of action,” he added.