“Inflationary pressure from the demand side isn’t forecast to be big and so monetary policies should remain accommodative for the time being,” Bank of Korea Governor Lee Ju-yeol said in his New Year’s speech, according to a bank statement.
Any further interest rate adjustment will come only after carefully considering the stability of financial markets, inflation and growth path, Lee added.
The Bank of Korea raised interest rates in November for the first time in more than six years to 1.50 percent, yet tempered market expectations for further hikes by raising concerns about the job market and other uncertainties.
The comments come as the nation’s headline inflation came in at 1.5 percent in December, below the bank’s target of 2 percent, raising doubts about the bank’s next steps. Market participants have been expecting the bank to tighten policies gradually in the coming year as weak inflation and uneven recovery in industrial production are risks to growth.
Lee added the BOK should review the new inflation target to be applied starting in 2019, as the current inflation target of 2 percent will expire by the end of 2018.
December’s core inflation, which strips out volatile food and fuel prices, rose 1.5 percent from a year ago, accelerating from 1.2 percent in November and marking the fastest gain since September when it rose 1.6 percent. – Reuters