South Korean central bank chief reiterated that a rate cut option isn’t on the table in spite of the unexpected fall in the gross domestic product (GDP) in the first quarter that has unleashed skepticism about Asia’s fourth largest economy.
“Our stance is unchanged,” said Bank of Korea Governor Lee Ju-yeol told reporters on Wednesday on the sidelines the annual meeting of finance ministers and central bank governors of 10 Association of Southeast Asian Nations (ASEAN) plus three Northeast Asian countries in Fiji.
“The mood would change after the second-quarter (GDP) data,” he added.
In a monetary policy meeting in April, Lee had struck down market speculation about a rate cut against deteriorating economic conditions after the U.S. Federal Reserve hinted a hiatus in rate normalization.
The debt market has been rallying on bets that rates in Korea would go lower with the three-month government bond yield falling below the policy rate of 1.75 percent. The Korean won on Tuesday fell to fresh low of 1,168.2 against the U.S. dollar.
Korea received upset with the GDP dropping 0.3 percent in the first quarter on quarter and gaining 1.8 percent on year, far below the central bank target of 2.5 percent.
Lee claimed the market was going “too far ahead”, adding that the economy can rebound on record fiscal spending. The market, however, went on its way, with the three-year government yield falling 2.9 basis points from the previous session to finish the morning trade at 1.728 percent. The next policy meeting falls on May 31.
Lee remained cautious about the recovery in the nation’s industrial data for March, but interpreted the turnaround in the country’s consumer and business sentiment in April as another positive sign. He also maintained his expectation that the global chip demand would improve in the latter half of this year.
By Kim Yeon-joo and Choi Mira
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]