South Korea's apex bank may lift rates soon

Lee Seong-Tae (SUPPLIED)

South Korea's central bank will likely start raising interest rates in the near future when it confirms a self-driven recovery in the private sector, its chief said yesterday.

"I think [the central bank] has to start raising interest rates once the private sector's self-driven recovery is confirmed," Bank of Korea Governor Lee Seong-tae told a parliamentary committee.

"I think it will happen in the not too distant future," he said. Lee, whose term ends at the end of March, refused to comment when asked if the central bank would raise the rates as early as its next policy meeting on March 11. Lee also said the Bank of Korea had reasons to start raising interest rates even before the US Federal Reserves.

"We will face growing inflation pressures, if not immediately, in the second half of the year, whereas the US is not totally free from deflation risks," he said.

The Bank of Korea has kept the benchmark rate at record-low two per cent for 12th consecutive months. At its previous policy review last week The Bank of Korea warned of considerable uncertainties in the economic outlook, citing Europe's debt woes, prompting economists to push back expectations for a rate rise to the second half of the year.

It said in a report submitted to lawmakers on Tuesday it would keep an easy monetary policy for the time being to support the economic growth amid growing global uncertainties. Lee first sent a strong signal in September last that he was ready to lift rates in October, but has since made conflicting comments about the timing.

 

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