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Some foreign investment banks have forecast South Korea’s central bank will lower its key interest rate in the near future to help stimulate growth, a report showed Tuesday.
The report by the Korea Center for International Finance said a number of leading IBs have predicted the Bank of Korea will move to lower rates to offset economic slowdown concerns brought on by persistent eurozone woes and sluggish growth in the United States and China.
The predictions come after the BOK froze the seven-day repo rate at 3.25 percent for the 12th straight month in June.
Bank of America Merrill Lynch said a rate cut can better insulate the country from foreign downside risks. It said such a move can be used to ease the country’s current monetary policy stance.
This view was shared by Morgan Stanley, which said a rate cut could take place in July or August to boost corporate sector confidence.
The investment bank, however, said that the BOK may not be in a hurry to take such a step.
Other IBs such as the Royal Bank of Scotland and JP Morgan Chase & Co. said the BOK will likely lower the key rate if South Korea’s domestic economy slows in the coming months.
They said an economic slowdown can occur if Greece leaves the eurozone or if the European Union is unable to come up with a viable plan to tackle its fiscal and financial sector troubles.
The latest report, however, showed that IBs such as Barclays Capital, Credit Suisse, Citigroup and Goldman Sachs expected the BOK to maintain its current monetary policy position.
“These IBs said the central bank’s decision to freeze the rate this month reflected market expectations, and that this position will be maintained for the time being,” the KCIF said.
The central bank had cut the benchmark rate to a record low of 2 percent between October 2008 and February 2009 in the wake of the global financial crisis. Since July 2010, it has raised borrowing costs by 1.25 percentage points in five steps to curb inflation with the rate reaching the current 3.25 percent mark in June 2011. (Yonhap News)
The report by the Korea Center for International Finance said a number of leading IBs have predicted the Bank of Korea will move to lower rates to offset economic slowdown concerns brought on by persistent eurozone woes and sluggish growth in the United States and China.
The predictions come after the BOK froze the seven-day repo rate at 3.25 percent for the 12th straight month in June.
Bank of America Merrill Lynch said a rate cut can better insulate the country from foreign downside risks. It said such a move can be used to ease the country’s current monetary policy stance.
This view was shared by Morgan Stanley, which said a rate cut could take place in July or August to boost corporate sector confidence.
The investment bank, however, said that the BOK may not be in a hurry to take such a step.
Other IBs such as the Royal Bank of Scotland and JP Morgan Chase & Co. said the BOK will likely lower the key rate if South Korea’s domestic economy slows in the coming months.
They said an economic slowdown can occur if Greece leaves the eurozone or if the European Union is unable to come up with a viable plan to tackle its fiscal and financial sector troubles.
The latest report, however, showed that IBs such as Barclays Capital, Credit Suisse, Citigroup and Goldman Sachs expected the BOK to maintain its current monetary policy position.
“These IBs said the central bank’s decision to freeze the rate this month reflected market expectations, and that this position will be maintained for the time being,” the KCIF said.
The central bank had cut the benchmark rate to a record low of 2 percent between October 2008 and February 2009 in the wake of the global financial crisis. Since July 2010, it has raised borrowing costs by 1.25 percentage points in five steps to curb inflation with the rate reaching the current 3.25 percent mark in June 2011. (Yonhap News)
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Articles by Korea Herald
