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BOK chief says loose policy has heightened financial imbalances

[SEOUL] South Korea's central bank governor warned that keeping monetary policy loose for long has increased financial imbalances. "The Bank of Korea (BOK) has a double mandate in that it must seek economic and financial stability," said BOK Governor Lee Ju-yeol in embargoed comments late on Wednesday at a year-end event. "However, financial imbalance has increased by keeping our accommodative policy stance long-term amid an unprecedented age of low growth and low interest rates." Lee's comments come as some in the market expect the central bank to cut interest rates again early next year to shore up a sputtering economy. "I believe we must heed the repeated warnings from the BIS (Bank of International Settlements) that excessive reliance on monetary policy could result in adverse effects from financial imbalance," the central bank chief said.

The BOK has cut rates four times since August of last year in 25-basis point moves to bring the base rate to a record low 1.50 per cent. The last cut was in June.

The central bank's next policy meeting will be on Jan. 14.

Lee also said the bank's task has been made difficult by the uncertainty around economic events. The governor didn't elaborate but said the BOK will stay focused on maintaining growth and financial stability.

REUTERS