Central bank to keep call rate at present annual level of 5.0%

The Bank of Korea (BOK) plans to keep the call rate at the present annual level of 5.0% in March, officials said after a meeting of the Monetary Board of Korea Thursday. Although various indicators show that the real economic slowdown has deepened, some Business Survey Indices (BSI) have showed signs of recovery, they said. Analysts speculated that the central bank was trying to buy more time to grasp the actual economic situation by keeping the call rate at its present level.

``Although the economy seems poised to improve in the second half, and the recovery pace may be faster than expected, it is still difficult to predict when the turning point will occur,`` said BOK Gov. Chon Chol-Hwan.

Noting that the consumer price inflation reached 4% in February from the same month last year, a central bank official said, ``The BOK decided to maintain the call rate at the present level in light of worrisome factors like hikes in some service charges and the won`s depreciation.``

He also cited fears over credit risks at companies whose financial health is still up in the air. Amid sliding market interest rates, however, enterprises are showing signs of emerging from the ongoing financial punch through the expanded issuance of corporate debentures and commercial papers (CPs).

Lee Byoung-Hee amdg333@donga.com