The head of the nation’s central bank expressed optimism about Korea’s future economic conditions despite the growing concerns about the Korean currency’s strong position against the Japanese yen.
Further, concerning the U.S. administration’s move to scale back its economic stimulus measures, Bank of Korea Gov. Kim Choong-soo predicted that it would not deal a further blow to the Korean economy, which has recently seen its stock markets struggle in the aftermath of the U.S. decision to reduce its economic stimulus.
“As far as I’m concerned, U.S. policymakers’ decision to taper quantitative easing by the end of this year comes on the premise of the U.S. economic recovery,” Kim told a news briefing on Thursday.
Linking the recovery in the U.S. with the globally upbeat growth outlook, he said that its stimulus-tapering policy would affect Korea “not negatively, but favorably.”
He described the situation in a positive light, saying, “Uncertainties (that had generated mounting anxiety) have rather been reduced.”
Kim, however, shared the view that Korea’s low-income households would suffer higher loan interest rates due to rising rates at home and abroad due to the U.S. tapering. He said policymakers should pay more attention to the record consumer debt levels.
Regarding the yen’s further slide against the won, he said the BOK could consider funding finances to several industries, such as automobiles, steel and machinery, hit by the cheap Japanese currency.
Countermeasures against the won’s appreciation should be focused on not the overall industry but certain sectors as it is a matter of export prices competitiveness, he said.
On the day, the BOK’s monetary policy committee remained the monthly benchmark interest rate untouched at 2.5 percent.
While U.S. investment bank Goldman Sachs has predicted a rate cut and some ruling party lawmakers claimed the necessity of lowering rates, the seven-member rate-setting panel unanimously decided to keep it unchanged.
The bank also remained its earlier growth outlook on the 2014 GDP growth at 3.8 percent and predicted that the economy would expand 4 percent in 2015.
Gov. Kim said the economy has been vitalized while consumer prices are rising. His remarks mean that a rate cut is not an appropriate option at the current stage.
Earlier in the day, the U.S. Federal Open Market Committee publicized its latest minutes, which hinted at tapering the two- or three-year-long quantitative easing policy by the end of this year.
The Korea Composite Stock Price Index dropped 12.85 points from the previous trading session to close at 1,946.11. The U.S. dollar fell 2.0 won to close at 1,062.9 won.
By Kim Yon-se