Arab Today, arab today bok expected to freeze key rate for sept
Last Updated : GMT 10:35:06
Arab Today, arab today
Arab Today, arab today

BOK expected to freeze key rate for Sept.

Arab Today, arab today

Arab Today, arab today BOK expected to freeze key rate for Sept.

Seoul - Yonhap

South Korea\'s central bank is strongly tipped to freeze its benchmark interest rate for September as a dimmer global economic outlook outweighs high inflation, a poll showed Tuesday. Twelve out of 14 economists forecast that the Bank of Korea (BOK) will leave the benchmark seven-day repo rate unchanged at 3.25 percent for the third straight month on Thursday, according to the survey by Yonhap Infomax, the financial news arm of Yonhap News Agency. Two analysts forecast a rate hike. Analysts said growing external risks, including concerns about a U.S. double-dip downturn and Europe\'s debt woes, would lead BOK policymakers to freeze the rate even as the August inflation hit a three-year high. \"It would be inevitable that growing downside risks to the U.S. and Europe will prompt Korea to lower its full-year growth rate. Policy actions focusing on the economy, rather than inflation, are widely anticipated,\" said Kim Yoon-gee, a senior economist at Daishin Economic Research Institute. In a separate poll, 95.6 percent of 160 bond traders forecast a rate freeze for this month, sharply higher than the 31.6 percent prediction made in the previous month. The prospects for the global economy are getting bleaker as the first-ever U.S. credit downgrade and the eurozone sovereign risks are raising concerns that the global economy may slide back into a recession. Debate over a third round of quantitative easing, known as QE3 in markets, has heated up as a batch of weak U.S. economic data is raising expectations that the U.S. will lay out more stimulus measures. Finance Minister Bahk Jae-wan said last week that the government could revise down its growth outlook for this year, which currently stands at 4.5 percent, citing economic uncertainty. The BOK\'s 2011 growth forecast stood at 4.3 percent. Korea\'s data on trade and industrial output are pointing to the slowing growth of the economy. The country\'s trade surplus shrunk to US$821 million in August on record imports and its industrial output grew at the slowest pace in 10 months in July. The government said in its monthly report that South Korea is facing increased economic uncertainties such as the global slowdown and market volatility while inflationary pressure is growing. Korea\'s consumer prices are under upward pressure as a hike in public service charges, high vegetable prices and continued economic growth are putting upward pressure on inflation. Consumer prices jumped a whopping 5.3 percent in August from a year earlier, quickening from 4.7 percent growth in July. Core inflation, which excludes volatile oil and food prices, rose 4 percent on-year in August, the sharpest gain in 28 months. Consumer inflation surpassed the upper ceiling of the BOK\'s 2-4 percent inflation target band for the eighth consecutive month, fanning concerns that the BOK may fail to meet its whole-year inflation target of 4 percent. The poll showed that experts are divided over whether the BOK will hike the rate once more or freeze it for the remainder of the year. \"High inflation pressure means that the central bank\'s tightening cycle remains intact. One rate hike is expected in the fourth quarter,\" said Yoon Yeo-sam, an analyst at Daewoo Securities Co. But Lim Noh-jung, an economist at Solomon Investment & Securities, forecast that the BOK will likely stand pat on the rate throughout this year on concerns about the slowing economy. The BOK has raised the borrowing costs by a total of 1.25 percentage points since July last year in a bid to tame growing inflation risks.

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