The Bank of Korea will maintain an accommodative monetary policy next year to help boost the country's economic growth and spur record-low inflation in Asia's fourth-largest economy, while also considering other means to assist the local economy, the central bank said Friday.
"Under the direction of its monetary policy in 2020, the Bank of Korea will maintain the easing stance of its monetary policy to support the recovery in growth and to ensure the rise in consumer prices will be stabilized at around the target level from a medium-term perspective," the central bank said in a press release.
The renewed pledge to support the economy also comes amid the worst outlook for Asia's fourth-largest economy in years.
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(Yonhap) |
The South Korean economy is estimated to grow 2 percent on-year in 2019, the slowest since 2009 when it expanded 0.7 percent from a year earlier.
It is projected to expand 2.3 percent in 2020, again marking the slowest growth since 2012, except for this year.
Against such a backdrop, the BOK has slashed the policy rate to a record low of 1.25 percent through two quarter percentage point rate reductions in July and October.
The central bank, however, said the degree of future policy easing will be determined and readjusted based on changes in economic conditions and the country's financial stability, as well as external risks.
"There exists a possibility that the volatility in the financial and foreign exchange markets may frequently expand due to the course of external risk factors," it said.
South Korea's exports have dropped for 12 consecutive months since December 2018, partly due to the prolonged trade dispute between the United States and China, the world's largest economies that are also the largest importers of South Korean products.
Still, the BOK noted the need for additional support may not immediately lead to a rate cut, stressing the need for "other" policy measures.
"It will seek alternative measures by enhancing its review and analysis of monetary policy measures other than policy rates," it said.
A BOK official explained such policy measures may include forward guidance, communication from the central bank about the state of the economy and the future course of its monetary policy.
The central bank's monetary policy direction also came as the country's consumer prices are expected to rise 0.4 percent from a year earlier in 2019, which would mark the slowest on-year gain since the country began compiling such data in 1965.
The BOK expects consumer prices to grow 1 percent next year, but that too will fall far short of its long-term target of 2 percent.
The central bank also highlighted the need to enhance its market communication, partly to help boost the effectiveness of its monetary policy.
"The BOK will work to boost the effectiveness of its monetary policy measures by enhancing its communication," it said. (Yonhap)
