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South Korea central bank chief says 2016 growth may miss forecast
[SEOUL] South Korea's central bank chief reiterated on Wednesday that its current monetary policy is supportive of growth but propped the door open to possible easing in future by adding the economy is recovering at a slower pace than earlier thought.
"Just because our monetary policy seems less accommodative than other countries on the surface does not mean that it is restraining growth," Bank of Korea Lee Ju-yeol said at a news conference held to mark his second year in office.
"We must also keep in mind that we are at risk of capital outflows unlike countries with reserve currencies." Mr Lee said the BOK was more wary early this year, referring to a surge in the dollar after the US Federal Reserve raised interest rates for the first time in a decade in December last year. The dollar has since lost some steam, easing downward pressure on emerging market assets such as the Korean won .
His comments on Wednesday mirrored Mr Lee's recent scepticism in previous months over the effectiveness of domestic rate cuts.
The governor added that South Korea cannot escape low growth and low inflation with monetary policy alone, and said structural reform and increased competitiveness should also play a role in boosting economic growth.
Mr Lee acknowledged there is underlying weakness in the economy at present from weak exports and slowing consumption and as a result, GDP growth this year would likely fall under 3 per cent, the BOK's current forecast.
He also said inflation would remain low for a while, although the dissipating effects from low global oil prices would likely take prices higher in the second half of the year.
The Bank of Korea next reviews policy and announces its revised economic forecasts on April 19.