BOK lowers call rate by 0.25%

The Bank of Korea (BOK) said Thursday that it decided in a meeting of its Monetary Board to lower the call rate by 0.25% point from the present annual rate of 5.25%.

After the meeting, BOK Governor Chon Chol-Hwan said, ¡°As the increase rate in the production and demand indicators has slowed down much soon than expected amid declining consumption and poor investment sentiment, Korea¡¯s economic growth rate is likely to fall to the 4% level. By lowering of interest rate, I expect investment and consumption sentiment to improve.¡±

Chon said, ¡°It is true that there is inflationary pressure due to the won¡¯s recent depreciation against the dollar, but it is viewed as unlikely that the interest rate cut will serve to boost commodity prices since the economy has shrunk significantly.¡±

Noting that there is a little room to slash interest rates now that the government`s ability to set monetary policy has improved thanks to the recent interest rate cut in the United States and the stabilization of the won, Gov. Chon said, ¡°As the financial market is on the upswing, I think the interest rate cut will bring the expected policy effects.¡±

On the sharp rise in consumer prices in January this year, Chon said, ¡°It resulted from the increase in international oil prices last year. As Iran did not participate in moves to reduce oil production this year and demand is dwindling due to the economic slowdown, there are few factors likely to abruptly boost oil prices.¡±

Pointing out that the central bank strongly requested that the government postpone the hike in public utility charges to the latter half this year as a means of curbing commodity price increases, Chon said, ¡°If the government puts off increases in seven or eight sorts of public service charges, the inflation rate will fall from the earlier expected 3.7-3.8%.¡±

Yonhap