À̹ÌÁö È®´ë South Korea¡¯s central bank chief drew the Maginot Line on how far the Korean interest rate can go and indicated a pause before venturing beyond the current historic low of 1.25 percent upon signs of improvement in the economy and bubbles in housing prices.
¡°We do not wish to consider interest rate in the zero percent range. There is the risk of capital flight if interest rates of economies without internationally-trading currency hover below those with reserve currency, ¡± Lee Ju-yeol, governor of the Bank of Korea (BOK), told reporters Friday after presiding over this year¡¯s first rate-setting meeting.
The monetary policy board decided to hold the benchmark rate steady at a record low of 1.25 percent, a level maintained since last October. It had brought the rate down by half a percentage point by two rate cuts last year, and had chosen to stay pat in November.
Lee claimed the current interest rate level was deemed ¡°accommodative¡± enough to back the economy and admitted the protracted low interest rate environment influenced the real estate market at a time the government has declared ¡°a war on speculation.¡±
¡°I do not see the government¡¯s property measures as being in conflict with the monetary easing stance. The BOK should maintain its accommodative policy while adjusting its level in consideration of financial stability,¡± he said.
Government bond yields rose across the board. The three-year government bond yield added 1.1 percentage points to 1.437 percent by midday. The five-year yield was up 1.5 percentage points at 1.551 percent and the 10-year 1.9 percentage points higher at 1.72 percent.
Lee also pointed to improvements in economic data and the trade environment.
¡°November industrial activity has improved, with gains seen in retail sales and facility investment. Leading indicators are also on the rise,¡± he said.
Asia¡¯s fourth-largest economy saw its exports suffer last year due to the U.S.-China trade war and sluggish demand and plummeting prices of semiconductors, Korea¡¯s largest export item. But recovery signs in the global chip market and the recent signing of the phase one trade deal between Washington and Beijing have ¡°brightened the prospects for the Korean economy,¡± Lee said.
When asked about the implications of the U.S.-China trade deal, Lee said some Korean exporters could lose out to American rivals as China greatly expands its level of U.S. imports. But he said the gains from reduced trade uncertainties would outweigh the costs.
¡°(With the easing of tensions), the Chinese economy could see a rebound, which would revive global demand in trade and investment. Overall, the benefits would be greater for Korean exports,¡± Lee said.
He also reaffirmed the BOK outlook for the semiconductor industry that demand would start picking up in the latter half.
By Kim Hyo-jin
[¨Ï Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]