Seoul, Jan 2 (IANS) South Korea’s central bank will be flexible in cutting its key rates down the road amid political turmoil and a slowdown, its chief said on Thursday.
In a New Year speech, Bank of Korea (BOK) Gov. Rhee Chang-yong said the central bank will decide its key rate flexibly while closely monitoring risks in the face of political and economic uncertainty, reports Yonhap news agency.
In November, the bank slashed its benchmark interest rate by a quarter-percentage point for the second consecutive session to 3 percent while hinting at possible additional cuts down the road after delivering bleaker growth projections amid slowing exports and uncertainties stemming from the incoming Donald Trump administration.
It marked the first back-to-back rate reduction since February 2009, when the country was reeling from the aftermath of the global financial crisis the previous year.
The BOK is scheduled to hold its rate-setting meeting this month and next month amid mounting uncertainties stemming from President Yoon Suk Yeol’s brief imposition of martial law, and subsequent impeachment.
Also, volatile currency rates and an economic slowdown, as well as the incoming Trump administration’s shift in key economic policies, are adding woes to Asia’s fourth-largest economy.
The Korean won sank to its lowest in over a decade against the U.S. dollar, and a deadly airplane crash is also negatively affecting already feeble consumer spending.
Against this backdrop, the finance ministry expects the economy to grow 1.8 per cent this year, slowing from last year’s estimated 2.1 per cent expansion. This year’s growth estimate is far lower than its earlier projection of 2.6 per cent.
Rhee also warned that extended political risk may negatively affect the country’s credit status, adding that acting President Choi Sang-mok’s appointments of two justices to the Constitutional Court would help stabilise the financial market as well as the economy.
–IANS
na/
