South Korea central bank suggests further rate cuts on hold

[SEOUL] South Korea's central bank governor on Thursday appeared to rule out any further rate cut in the short term, and said the bank's decision to slash its 2015 economic growth was no cause for pessimism.

After two rate cuts last year, the Bank of Korea's benchmark rate is currently at a record-equalling low of 2.0 per cent - a level not seen since 2009-10 when Asia's fourth-largest economy was seeking to recover from the global financial crisis.

Some analysts have predicted a further cut of 25 basis points in the coming months to help boost tepid domestic consumption and ease deflation concerns stemming from low oil prices.

But BOK governor Lee Ju-Yeol indicated there was no immediate need to try and stimulate the economy by releasing more money into the system.

"We cut interest rates twice last year, so the level of monetary easing is greater than before," Lee told journalists.

"Now, we have to wait and see how the effects of the cuts we took last year will pan out," he added.

Last week, the BOK slashed its economic growth forecast for next year to 3.4 per cent, down from an earlier forecast of 3.9 per cent.

But Lee stressed this was because of "exceptional factors" including falls in government infrastructure investment due to shortfalls in tax revenues.

"This does not mean our economic outlook has become more pessimistic", he said.

"The 3.4 per cent growth forecast is largely in line with the country's growth potential," he added.

Exports, which account for about half of the South's economy, grew 1.2 per cent year-on-year in the fourth quarter of last year, slowing from 3.6 per cent in the third quarter and 3.2 per cent in the second quarter.

AFP