BOK to hold call rate at current level

The Bank of Korea (BOK) convened a meeting of its Monetary Board on Thursday and resolved to keep the call rate in January at the present level of 5.25%. But, the central bank said it would closely monitor future economic developments and cope with changes flexibly, indicating the possibility that it might lower call rate next month.

Chon Chol-Hwan, governor of the BOK, said in a press conference right after the Monetary Board meeting, ¡°Although some argued that the interest rate should be lowered to prevent an abrupt economic slowdown, we decided not to cut the interest rate, judging that we cannot expect to see positive effects from an interest rate cut in the current tight money market situation.¡±

Gov. Chon said, ¡°We decided to monitor future developments for the time being after consumer prices turned upward in December and inflationary pressure threatened to grow due to the won¡¯s depreciation against the dollar. He added, ¡°We also considered the fact that the lowering of interest rates at present could be regarded as a sign that government was abandoning its earlier target of stabilizing commodity prices and the won¡¯s value, and as a sign of its weakened will to push restructuring.¡±

The central bank also said that it would place first priority in its monetary and credit policies on price stabilization by achieving this year¡¯s inflation target of 3¡¾1% and preventing this year¡¯s commodity price rise from developing into mid-term inflation.