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No rush for Bank of Korea to cut interest rates, says departing board member - REUTERS
SEOUL, April 16 (Reuters) - The Bank of Korea (BOK) should not rush to lower interest rates as price stability remains the top policy priority for the central bank over slowing domestic demand, a departing board member said on Tuesday.
"There is no need to lower interest rates in a rush because economic growth is projected to be above the potential growth rate, while there are several uncertainties and financial markets have been under accommodative conditions for a few months," Cho Yoon-je told a press conference.
Cho's four-year term as a member of the seven-seat monetary policy board ends on April 20. His last meeting was on Friday, when the central bank kept the policy rate, now at a 15-year high, unchanged for the 10th straight meeting.
Cho said it was also important to bring inflation down to the central bank's target level of 2% as soon as possible to reduce the accumulated burden in recent years of high inflation.
In a reference to the won , which hit a 17-month low and breached a major psychological threshold of 1,400 per dollar on Tuesday, Cho said its recent volatility was sharper than for other currencies but not so excessive to worry about.
In a separate text message to reporters, the BOK said Cho did not mean to downplay recent declines.
"When board member Cho gave his personal view during the presser to say that the exchange rate was not worrisome, he didn't mean to say that he is not concerned about FX levels but rather the overall state of the economy isn't something he would worry about given solid fundamentals shown through current account flows, forex reserves level etc," the BOK said.
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Heightening tensions in the Middle East were likely behind the won's sharp losses last week, given the fact that most of South Korea's oil imports are supplied by the region, he said. Cho said the central bank needed to be cautious about expanding its current three-month forward guidance to a longer time period, because domestic monetary policy is affected by different external and internal factors, unlike in the case of the U.S. Federal Reserve.
SEOUL, April 16 (Reuters) - The Bank of Korea (BOK) should not rush to lower interest rates as price stability remains the top policy priority for the central bank over slowing domestic demand, a departing board member said on Tuesday. "There is no need to lower interest rates in a rush because economic growth is projected to be above the potential growth rate, while there are several uncertainties and financial markets have been under accommodative conditions for a few months," Cho Yoon-je told a press conference.
Cho's four-year term as a member of the seven-seat monetary policy board ends on April 20. His last meeting was on Friday, when the central bank kept the policy rate, now at a 15-year high, unchanged for the 10th straight meeting.
Cho said it was also important to bring inflation down to the central bank's target level of 2% as soon as possible to reduce the accumulated burden in recent years of high inflation.
In a reference to the won , which hit a 17-month low and breached a major psychological threshold of 1,400 per dollar on Tuesday, Cho said its recent volatility was sharper than for other currencies but not so excessive to worry about.
In a separate text message to reporters, the BOK said Cho did not mean to downplay recent declines.
"When board member Cho gave his personal view during the presser to say that the exchange rate was not worrisome, he didn't mean to say that he is not concerned about FX levels but rather the overall state of the economy isn't something he would worry about given solid fundamentals shown through current account flows, forex reserves level etc," the BOK said.
Heightening tensions in the Middle East were likely behind the won's sharp losses last week, given the fact that most of South Korea's oil imports are supplied by the region, he said. Cho said the central bank needed to be cautious about expanding its current three-month forward guidance to a longer time period, because domestic monetary policy is affected by different external and internal factors, unlike in the case of the U.S. Federal Reserve.
