Call Rate Likely to Stay at Current Level in June 3, 2002

Financial circle estimates that call rate in June would remain at current level (4.25 percent).

The Monetary Policy Committee in the Bank of Korea is likely to hold a meeting on the 5th, and set the goal of call rate for June.

Financial experts think that the MPC possibly keep the call rate at the current level, as the rise of call rate might be misunderstood ahead of local elections, and it is hard to predict the response in the financial market. Market disorder caused by the chain increase of interest rate and the shift of funds in the financial circles can be a variable for the election.

The stable price by the strong won is another reason of the maintenance of current call rate. In addition, rise of interest rate can drive the fund out of dull stock market with the composite stock exchange index below 800 points.

On the contrary, interest rate can increase as a preliminary measure to prevent overheated business and prices instability, when exports increase in May, and GDP in the 1st quarter increases 5.7 percent implying the recovery of economy.

Financial circles estimate that call rate would rise by 0.25 to 0.50 percent points in the 3rd quarter, when several economic indicators like production, investment, and exports would show upward trend.

Sang-Chul Kim sckim007@donga.com