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BOK holds key rate steady at 1.25% in Dec.

South Korea's central bank on Thursday held its key rate steady for December to help support growth following a rate hike in the United States.

In a widely expected move, the monetary policy board of the Bank of Korea voted unanimously to keep the key rate at 1.25 percent.

The move represents the BOK's extension of its wait-and-see mode for the sixth consecutive month after sending the key rate to a record low level to stimulate growth in Asia's fourth-largest economy.

The freeze came hours after the U.S. Federal Reserve raised a key interest rate by a quarter of a percentage point to a target range of 0.5 percent to 0.75 percent.

Fed Chair Janet Yellen said that the Federal Open Market Committee judged that a modest increase in the federal funds rate is appropriate, citing solid progress toward its goals of maximum employment and 2 percent inflation.

"We continue to expect that the evolution of the economy will warrant only gradual increases in the federal funds rate over time to achieve and maintain our objectives," Yellen said in a news conference on Wednesday.

BOK Gov. Lee Ju-yeol said he does not believe a U.S. rate hike could lead to any abrupt capital flight out of South Korea.

"We are not in a situation in which we should be concerned about any drastic capital outflow as we have solid fundamentals," Lee said in a news conference.

South Korea's foreign exchange reserves came to US$371.99 billion in November, making Seoul the world's eighth-largest holder of such reserves.

The country has also ample liquidity in the market due to a current account surplus, Lee said.

The BOK monetary policy board said it forecasts that the domestic economy will sustain its trend of modest growth going forward, but said that the downside risks to the future growth path have expanded a bit, due to increased uncertainties in recent domestic and external conditions.

The board said, "(It) will closely monitor the uncertainties in domestic and external conditions and their effects, the progress of monetary policy normalization by the U.S. Federal Reserve, and the trend of increasing household debt."

The freeze came amid concerns over South Korea's growing household debt, one of the highest levels in the world compared with income levels.

South Korea's overall household debt reached a record high of 1,295.8 trillion won ($1.09 trillion) as of end-September, according to BOK data.

The BOK will maintain its monetary easing policy to support the country's economic growth, but the authorities will ensure the financial markets will remain stable, Lee said, hinting the BOK may not lower the base rate. (Yonhap)
Korea Herald daum