South Korea's central bank on Thursday froze its key interest rate for a third straight month in November, a move apparently aimed at kick-starting a sputtering economic recovery.
In a monthly rate session, the Bank of Korea (BOK) policymakers retained the November target for the call rate at 4.5 percent, three months after boosting the rate to a five-year high in August.
The call rate refers to the interest charged on overnight inter-bank loans. The result is in line with 16 analysts' unanimous forecast in a poll by Yonhap Infomax, the financial news arm of Yonhap News Agency.
"The economic expansion has slowed its pace," BOK Gov. Lee Seong-tae told reporters after the rate session. "Still, the economy is moving within a course that the bank expected a few months earlier."
Unlike the central bank's previous forecasts, inflationary pressure has tamed significantly, but soaring property prices became the bank's key concern this time, he said.
"Soaring apartment prices in Seoul and adjacent areas are a big concern," Lee said. "Our policymakers are keeping a close eye on the situation."
Some of experts have said the central bank should raise the key rate to rein in housing prices, which shot up 1.1 percent in the 10 days ending last week, the biggest weekly gain in three years.
South Korea's Finance Ministry unveiled a set of measures on Friday to lower prices of newly built apartments and increase the supply of homes.
The central bank chief, however, declined to say whether the rising housing prices will affect monetary policy next month.
"We cannot make any comment on the issue now," Lee said.
"However, the Bank of Korea is thinking over what kind of things that the central bank can do to improve the situation."
The central bank said in a statement that private consumption is exhibiting a slowdown in the pace of its expansion.
"While sluggishness in construction investment shows signs of some alleviation, the upward pace of real estate prices has accelerated," the BOK said.
Despite strong property prices, mounting concerns over South Korea's economic recovery and the global economic outlook seem to have given the central bank little reason to hike the rate, the analysts said.
South Korea's economy was widely expected to grow at above 5 percent this year, but concerns have arisen over the economic recovery due to the firmer value of the South Korean currency versus the U.S. dollar and a slowdown in the U.S. economy.
On Nov. 2, South Korea's Vice Finance Minister said in a weekly briefing that South Korea's economic recovery is still proceeding, but the economy faces increasing downside risks.
In early November, global financial institutions such as Merrill Lynch and Citigroup also warned about a recession in the U.S. economy, which stumbled in the third quarter from a sharp drop in home construction. South Korea's LG Economic Research Institute predicted that the global economy will remain in a slowdown at least until mid-2007 due to rising oil prices and a slowdown in the U.S. economy, the world's largest.
Inflation remained tame, giving the bank little reason to hike the rate, according to experts.
South Korea's consumer prices posted a larger-than-expected fall in October due to a decline in the prices of agricultural products and oil, a government report early this month said.
Consumer prices in South Korea slipped 0.5 percent in October from the previous month.
Seoul, Nov. 9 (Yonhap News)
S. Korea's central bank retains key rate for November |
