By Kim Tae-gyu
Staff Reporter
The debates over when the Seoul administration has to embark on exit plans out of the present expansionary policies recurred as World Bank President Robert Zoellick warned of asset bubble risks in Asia.
Earlier this week, Zoellick said that Asian countries might face inflationary pressures due to huge liquidity floating in the financial markets as a result of stimulus packages against recessions in the region.
The World Bank chief particularly took issue with the fast recovery in the Asian nations, which he feared may end up as asset price bubbles if they fail to take countermeasures at the right time.
The remarks generated dispute in Korea as the top banker of Asia's fourth-largest economy insinuated of late that the central bank would not spike the record low interest rate this year.
Talking about monetary policies on Thursday, Bank of Korea (BOK) Governor Lee Seong-tae noted that the bank will maintain an accommodative approach until a full-fledged rebound materializes.
Under such a mindset, BOK kept the country's benchmark seven-day policy rate at 2 percent for this month, the lowest ever reached nine months ago to grapple with the global financial crisis.
``BOK is required to raise its interest rate as soon as possible in order to prevent the asset price bubbles from taking place,'' said professor Kim Sung-jo at Hansung University.
``Otherwise, the nation would have a shot at facing sharp appreciation in equities or real estate markets next year, which would heavily weigh on the economy. We have to hurry,'' he said.
House prices plunged late last month in the aftermath of the collapse of Lehman Brothers. But they have recovered of late, particularly in Seoul and its vicinity, which urged the government to come up with several anti-speculative steps.
The share prices also almost halved after the financial swoon but it rocketed more than 60 percent this year as the recession faded away.
By contrast, financial bureaucrats are opposed to the early exit plans.
Strategy and Finance Minister Yoon Jeung-hyun has reiterated that the country would not launch exit plans this year as there remains too much uncertainty and Financial Services Commission Chairman Chin Dong-soo has echoed such opinions.
``As Korea's top financial policymakers are against an early initiation of the exit plans and the United States is also postponing the exit strategy, Seoul will not change its expansionary stance soon,'' Samsung Securities economist Hwang Geum-dan said.
``Many market watchers think that the timing of any exit plan will be in the second quarter of next year rather than in the first quarter.''