South Korea central bank chief: low growth may continue, policy to stay accommodative

[SEOUL] South Korea's central bank chief said on Tuesday monetary policy should remain accommodative as low growth could continue in the foreseeable future while financial market volatility may widen.

"As low growth may continue for a considerable period of time, the Bank of Korea will support economic recovery by maintaining accommodative monetary policy," Governor Lee Ju-Yeol said in a New Year speech.

He stressed the importance of keeping financial markets and household debt stable, a sign the central bank could refrain from taking action and leave the benchmark rate unchanged at a record low of 1.25 per cent at its policy meeting on Jan 13.

In December, the central bank warned of the debt-service capacity falling for some households on a delayed economic recovery and rising interest rates.

South Korea is bracing for higher loan rates as local bond yields track a rise in US interest rates.

The central bank sees Asia's fourth-largest economy expanding 2.8 per cent this year after growing 2.7 per cent in 2016.

REUTERS