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SKorea cbank holds rates on global woes
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SEOUL: South Korea's central bank held interest rates steady on Thursday, defying market expectations for a rise, and signalled future tightening would only be modest given growing uncertainties over the global economy.
Bond yields tumbled to their lowest in 20 months and the interest rate swaps spread narrowed as investors scrambled to price out some of the expected rate rises for this year.
In line with some central banks that have cited concerns over the global outlook as a factor to keep rates on hold -- such as those of Australia and Malaysia -- the Bank of Korea said that economic uncertainties would increase in the coming months.
"I think the Bank of Korea will move only when inflation threat becomes a real one (threat)," said Yoon Chang-yong, an economist at IBK Investment & Securities.
Analysts surveyed by Reuters after the policy announcement predicted the policy interest rate would be raised by 25 basis points next month for the second and last time this year. Previously, they had expected a total of three rises in 2010.
The Bank of Korea left its base rate, the 7-day repurchase agreement rate, unchanged at 2.25 per cent for the second straight month. It unexpectedly raised it from a record low of 2 per cent in July.
"The US economy has shown signs of a slowdown. Looking ahead, there exists the possibility of the heightened volatility of economic activity in major countries acting as a risk factor for the global economy," the central bank said in a statement.-Reuters
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