Monetary Board likely to lower call rate

Many analysts predict that the Monetary Board will lower the call rate by 0.25% point at its regular meeting on Feb. 8. This forecast is based on the U.S. Federal Reserve Board's decision Wednesday to cut its federal fund and rediscount rates by 0.5% point each and the stabilization of the Korean won.

Bank of Korea (BOK) governor Chon Chol-Hwan, concurrently chairman of the Monetary Board, also said recently that the central bank would flexibly adjust the call rate based on the economic situation, a statement analysts said indicated an imminent interest rate cut.

Most market analysts also predicted that the call rate would be slashed by 0.25% point from an annual 5.25% to 5.0%. Noting that the Monetary Board did not lower the call rate in January due to the volatile won-dollar exchange rate and commodity prices, an official at Samsung Securities Co. said that the possibility of lowering the call rate in a bid to boost economic activity was high at present because the won¡¯s value has stabilized.

Monetary Board members, however, disagreed on the advisability of lowering the call rate. A board member said that taking into account the slumping economy and the U.S. step to lower interest rates by as much as 1% point, the call rate should be slashed. But another member said it was not desirable for the board to cut the rate in light of currently volatile commodity prices, as attested by the 1.1% increase in consumer prices in January.