SEOUL: South Korea’s government and central bank agreed yesterday to cooperate closely in economic and monetary policy, a statement seen by analysts as ruling out an early interest rate rise.
THIS WAY PLEASE: Yoon (left) and new governor of the Bank of Korea Kim pose before their meeting in central Seoul. — Reuters photo
“Both sides agreed to share information and work closely for harmonised economic and monetary policies,” they said in a joint statement after a meeting between Finance Minister Yoon Jeung-Hyun and the new Bank of Korea governor, Kim Choong-Soo.
Kim, a close associate of President Lee Myung-Bak, took office last Thursday.
Despite reaffirming the central bank’s independence, he was expected to keep the benchmark rate at a record low at least until the end of the second quarter in line with government policy.
Yoon in an interview last month said South Korea would not change policies to stimulate the economy until at least November when it hosts a G20 summit.
“Before, it was as if there was some sort of a disagreement between the central bank and the government,” Ough Chang-Sup, an analyst at IBK Securities, told Dow Jones Newswires.
“But with the new BOK governor, the two are now likely to show an agreement in their monetary policy stance, which will likely mean a significant delay in any rate hike.”
The bank in March kept its key rate at an all-time low of 2.0 per cent for a 13th straight month. It holds the next rate-setting meeting this Friday.
Kwon Young-Sun, a Nomura economist, said he now expects a 25 basis-point rate rise in September and another of the same size in December.
The finance minister and central bank chief agreed that industrial production, exports and local demand are continuing to improve despite some lingering uncertainties at home and abroad, the statement said.
Jang Byung-Wha, a deputy central bank governor, told reporters Asia’s fourth largest economy probably performed better than expected in the first quarter, boosting the growth estimate for the full year.
The ministry’s forecast for this year is five per cent growth while the central bank predicts 4.6 per cent.
The bank will release a revised estimate next Monday. — AFP