19.1 C
Australia
Tuesday, October 27, 2020

South Korea central bank cuts GDP outlook, open to more stimulus

Must read

Jarrod Andrew Swanson convicted for possessing child exploitation files

A man convicted of using WhatsApp to share explicit child exploitation files says he was so high on ice he didn’t even remember...

Speed blitz in Gold Coast hinterland nabs hundreds

A stretch of road in the Gold Coast hinterland has become a pseudo racetrack with a police blitz nabbing 60 motorists for exceeding...
The Indian Telegraphhttps://theindiantelegraph.com.au/
Established in 2007, The Indian Telegraph is a multi award winning digital media company based in Australia.

South Korea’s central bank kept interest rates steady on Thursday, but sharply downgraded its 2020 growth outlook and kept the door open for more monetary stimulus to support an economy hard hit by the coronavirus pandemic.

The Bank of Korea kept the seven-day repurchase rate at a record low of 0.5%, in an unanimous and widely expected decision, after 75 basis points of rate cuts this year.

It said gross domestic product would likely shrink 1.3% in 2020 – the biggest contraction in more than two decades – from a previous forecast for a 0.2% decline.

Governor Lee Ju-yeol said monetary policy needed to be “actively” used if the downturn worsened, reiterating the central bank was open to more rate cuts and was willing to expand the use of other monetary tools.

“There is room to respond with rate cuts,” Lee told a press conference livestreamed via Youtube.

“That said, as base rate is at a considerably low level we will need to be cautious on that by reviewing the expected impact as well as adverse effects.”

He said the central bank was open to increasing bond purchases and carrying out open market operations but was, for now, not considering yield curve controls – a policy adopted by some central banks to hold down long-term interest rates.

“The negative growth of 1.3% outlook was somewhat shocking, (I) didn’t think (the BOK) would be this drastic,” said Yoon Yeo-sam, an economist at Meritz Securities.

September futures on three-year treasury bonds initially rose, but later retreated as Lee sounded cautious about the possibility of more rate cuts.

The BOK is walking a tight rope as it tries to balance the need for more stimulus with the risk that further rate reductions may encourage more cheap borrowing and worsen a home buying frenzy. Property prices have risen rapidly, particularly in Seoul, despite several cooling measures.

The pandemic pushed South Korea’s export-led economy into its worst recession in over 20 years and analysts worry this could drag into the third quarter as the government considers imposing the highest level of physical distancing.

Lee expected exports to rebound in the second half of the year but only gradually as global demand still recovers from the coronavirus fallout.

South Korea had been more successful than others in containing the virus, managing to avoid a full-blown lockdown, but suffered a setback this month with a church outbreak which spread to a political rally.

The policy review comes as the government and opposition are debating a fourth extra budget to bolster the 277 trillion won ($233.82 billion) worth fiscal stimulus pledged this year.

($1 = 1,184.6800 won)

(Additional reporting by Jihoon Lee; Editing by Ana Nicolaci da Costa)

(Only the headline and picture of this report may have been reworked by The Indian Telegraph staff; the rest of the content is auto-generated from a syndicated feed.)

Latest article

Climate NSW, Qld: ‘Harmful’ forecast of storms

Triple menace storms are anticipated to ravage southeast Queensland and northern NSW on Tuesday and Wednesday, as forecasters warn it is a style...

Victorian lockdown: Daniel Andrews celebrates reopening with ‘prime shelf’ drink

Daniel Andrews has been slammed on social media after making good on his promise to have a good time easing Melbourne’s restrictions with...

Cricket: The Boxing Day Check not solely will likely be on the MCG however will possible have a crowd too

The lifting of lockdown in Victoria has paved the way in which for crowds to attend this yr’s Boxing Day Check between Australia...

Corrimal: Pedestrian killed, hit by truck

A person has died after he was hit by a truck in a carpark close to Wollongong.The incident occurred simply after 10am Monday...

Coronavirus Victoria: PM says ‘lengthy winter’ lockdown over as restrictions ease

The Prime Minister has congratulated Victorians on the forthcoming easing of restrictions after the state recorded no new circumstances for the primary time...