MNI STATE OF PLAY: South Korea's Cenbank Focused On Inflation

The Bank of Korea on Thursday made it clear that it has placed the top priority of curbing inflationary pressures over concerns of a weaker economy as the growth pace of key trading partner China slows.

The BOK raised its policy interest rate to 1.50% from 1.25%, although private economists were split on whether the board would wait until a new governor was fully in place, see: MNI STATE OF PLAY: Bank Of Korea Cautious Even As Prices Bite.

The BOK indicated that it would focus its efforts to curb inflation. South Korea’s CPI rose 4.1% y/y in March from 3.7% in February, the highest since December 2011 when it rose 4.2%.

“The Board will appropriately adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its recovery and inflation to run above the target level for a considerable time, despite underlying uncertainties in domestic and external conditions,” a policy statement released by the BOK said.

“The Board will continue to conduct monetary policy in order to sustain the recovery of economic growth and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability.”

In its first-ever rate review held without a governor and the decision was unanimous. South Korea has nominated Rhee Changyong, an International Monetary Fund official, as its new central bank chief and he is expected to take office after National Assembly approval.