S.Korea keeps interest rates unchanged at 3.0%

South Korea's central bank kept its key interest rate unchanged at 3.0 percent, defying expectations that it would take advantage of low inflation to announce an economy-boosting cut.

The Bank of Korea on Thursday froze its key rate for the second month in a row, having trimmed the rate in July by 25 basis points, in its first policy easing since early 2009.

The July cut coincided with government efforts to reverse a slowdown in the South Korean economy which has struggled with an export slump caused by a weak US economy and the prolonged eurozone debt crisis.

Market analysts had been expecting a further 25 basis point reduction Thursday on the back of government data showing inflation at a 12-year low of 1.2 percent in August and unemployment holding steady at 3.1 percent.

"I think it's a very disappointing decision," said Frances Cheung, a senior strategist at Credit Agricole CIB in Hong Kong.

"Given the weak domestic demand and low inflation, I can see no hurdle to stop them cutting interest rates," Cheung told AFP.

South Korean exports fell for the second consecutive month in August, down 6.2 percent from a year earlier to $42.97 billion. July exports were down 8.8 percent year-on-year.

In June, South Korea revised its economic growth forecast for 2012 down to 3.3 percent from its earlier projection of 3.7 percent, mainly as a result of weak exports.

Earlier this week, the government announced a new $5.2 billion stimulus package of spending and tax relief plans, which Finance Minister Bahk Jae-Wan called a response to "growing concerns about our sagging economic power".

In its statement Thursday, the central bank said it believed the stimulus package would likely "contribute to preventing any deepening of the economic slowdown".

But Credit Agricole's Cheung argued that the package alone was not sufficient and the economy needed both interest rate cuts and fiscal relief to pick up any genuine pace.

"It needs a combination of both monetary and fiscal policy to really have an impact," she said.

The bank said consumer inflation was expected to remain below the median target of 3.0 percent for the time being, despite price pressures caused by a recent typhoon and unstable oil and grain prices.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Couple married 67 years holds hands in final hours together
    Couple married 67 years holds hands in final hours together

    FRESNO, Calif. (AP) — After spending 67 years together as devoted husband and wife, there was no question how Floyd and Violet Hartwig would end their lives — together. …

  • Lupita Nyong'o's $150,000 Oscars dress stolen from hotel
    Lupita Nyong'o's $150,000 Oscars dress stolen from hotel

    The $150,000 pearl-studded, custom-made Calvin Klein dress worn by Oscar-winning actress Lupita Nyong'o at this year's Academy Awards has been stolen, police said on Thursday. The gown, embellished with 6,000 natural white pearls, was stolen from Nyong'o's room at the London Hotel in West Hollywood, during the day on Wednesday, a spokesman for the Los Angeles County Sheriff's Department in West Hollywood said. "Ms Nyong'o was not in the room at the time of the theft," Deputy John Mitchell …

  • US-led strikes on IS after group seizes 220 Christians
    US-led strikes on IS after group seizes 220 Christians

    The US-led coalition has carried out air strikes against the Islamic State group in northeastern Syria, where the jihadists have launched a new offensive and kidnapped 220 Assyrian Christians. The raids on Thursday struck areas around the town of Tal Tamr in Hasakeh province, the Syrian Observatory for Human Rights said, without giving information on possible casualties. The town remains under the control of Kurdish forces, but at least 10 surrounding villages have been seized by IS, along …

  • 3 Pinays on Forbes power women list
    3 Pinays on Forbes power women list

    Three Filipina executives, who are all daughters of known business tycoons in the country, made it to Forbes’ list of the 50 most powerful businesswomen in Asia. Teresita Sy-Coson, vice chairman of SM Investments and chairman of BDO Universal Bank, was included in the list for the fourth year in a row since its inception. “Under her (Sy-Coson) lead SMIC became the largest listed company on the Philippine Stock Exchange by market cap. Also in the 2015 list is 70-year-old Helen Yuchengco-Dee, …

  • Militants abduct more Christians, smash ancient artifacts
    Militants abduct more Christians, smash ancient artifacts

    BEIRUT (AP) — Islamic State militants seized more Christians from their homes in northeastern Syria in the past three days, bringing the total number abducted by the extremist group to over 220, activists said Thursday. …

  • 13 of 15 SAF survivors to leave PNP hospital
    13 of 15 SAF survivors to leave PNP hospital

    Thirteen of the 15 Special Action Force (SAF) policemen who survived the bloody firefight with Muslim rebels in Mamasapano last month are ready to go home after a month of medical treatment, a police official said yesterday. Philippine National Police (PNP) spokesman Chief Superintendent Generoso Cerbo Jr. said the two remaining survivors will have to stay in hospital for further treatment, one of whom has shrapnel embedded near his spine. One of the two SAF commando survivors is still …

  • US sends spy plane to patrol disputed sea
    US sends spy plane to patrol disputed sea

    The United States has deployed its newest and most advanced surveillance aircraft for patrols over the West Philippine Sea and South China Sea. The P-8A Poseidon aircraft completed more than 180 flight hours from Feb. 1 to 21 from Clark Air Base, according to the US Navy’s 7th Fleet. …

  • China subs outnumber US fleet – admiral
    China subs outnumber US fleet – admiral

    China is building some “fairly amazing submarines” and now has more diesel- and nuclear-powered vessels than the United States, a top US Navy admiral told US lawmakers on Wednesday, although he said their quality was inferior. Vice Admiral Joseph Mulloy, deputy chief of naval operations for capabilities and resources, told the House Armed Services Committee’s seapower subcommittee that China was also expanding the geographic areas of operation for its submarines, and their length of …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options