BOK Freezes Call Rate

The Bank of Korea (BOK) decided during the first meeting of this year to keep its overnight call rate unchanged, freezing the call rate for five consecutive months after a jump in July and August 2007.

The BOK decided to keep the benchmark call rate target on hold at five percent in January after holding a meeting at the Bank of Korea, Namdaemunno, Jung-gu, Seoul, yesterday.

“Although the economy is gaining its momentum via robust export and brisk consumption, economic uncertainties are still high due to soaring international oil prices and possibility of uncertainties in the global financial market,” said an official from the BOK, explaining the backdrop of the call rate freeze.

The official added, “Regardless of rapidly growing consumer prices, there is a limit to the real estate price hike. Amid abundant liquidity in the market, the changes in the capital flow are causing the market rate to continue its short- and long-term upward streak.”

A senior official from a commercial bank said, “Given the recent price hike, it seems that the central bank should raise the call rate. However, it could not make a rate increase since Korea might face economic difficulties due to U.S. economic slowdown and oil price hike.”

Bank of Korea Governor Lee Seong-tae made a comment about the central bank’s report to the presidential transition team after the meeting on Wednesday that the central bank’s policy does not contradict with the incoming government’s policy of encouraging economic growth.”

When Kang Man-soo, head of the economic affairs subcommittee on Lee’s transition team, commented that the central bank should make efforts to stabilize real estate price, the bank governor responded, “When we draft a monetary policy, we neither consider real estate price as the ultimate goal, nor automatically link real estate price with the monetary policy.”

peacechaos@donga.com