Bank of Korea Governor Lee Ju-yeol for the first time indicated Monday that the central bank may consider ending its loose monetary policy on more convincing signs of pickup in the economy.
“The economy has been progressing, but the growth path is still highly uncertain and demand-end inflationary pressure not that great,” Lee told a bank ceremony marking its 67th anniversary of establishment.
“If the economic conditions show clear improvement, there may be a need to adjust our monetary policy. We would have to closely study the option,” he said.
Lee has until recently maintained that the central bank will keep a monetary policy accommodative to stimulate the slow-moving economy regardless of the tightening cycle in the United States. The Bank of Korea recently revised up the preliminary first-quarter gross domestic product growth figure to 1.1 percent, which sharply accelerated from 0.5 percent in the fourth quarter. The central bank is due to adjust up its full-growth estimate from 2.6 percent.
It is the first time for the BOK chief to mention the possibility of shift in the policy on benchmark interest rates that have come down from 3.25 percent in June 2011. The key rate stayed unchanged since it was brought down to a record low of 1.25 percent in June 2016.
Lee’s comment coupled with the expectations for another hike in the Fed fund rates this week sent bond yields sharply higher. The benchmark three-year bond yield ended Monday at 1.697 percent, down 6.5 basis points from the previous session.
Lee reiterated that the country’s economy would grow faster than the April projection of 2.6 percent given the strong exports and investments amid moderate recovery in private consumption. In April, the central bank revised up its gross domestic product (GDP) outlook for this year to 2.6 percent from 2.5 percent estimated in January.
Growth pace could pick up helped by increased fiscal spending to promote jobs, he said. He later told reporters that he would be more specific after the bank studies second-quarter performance and announce revised growth outlook next month.
By Boo Jang-won
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]