South Korea leaves interest rates on hold

| October 14, 2010 | 0 Comments
South Korea leaves interest rates on hold

The Bank of Korea (BoK) has today opted to leave interest rates on hold at 2.25% - for the third consecutive month.

The decision surprised many economists who had expected rates to be lifted to 2.5%.

The central bank left interest rates at the record low 2% for 17 months following the global economic downturn but raised it to 2.25% in July.

Commenting on its decision, the BoK said: “Looking ahead, there exists the possibility of the heightened volatility of economic activity and exchange rates in major countries acting as a risk factor for the global economy.”

Earlier this week, it emerged that South Korea has the lowest unemployment rate, at 3.4%, among the 33-member OECD countries.

South Korea, which is Asia’s fourth-largest economy, has grown strongly this year, boosted by exports and increasing consumption and facilities investment.

As a result, the International Monetary Fund (IMF) recently lifted its 2010 growth forecast for the economy to 6.1% from 5.75%.

Meanwhile, South Korea is one of many countries that has recently come under fire for making its currency, the won, cheaper after intervention from the BoK.

Last weekend’s IMF and World Bank annual meeting in Washington saw the currency issue unresolved.

The IMF has previously expressed its concern for a currency war. The Fund said if Governments across the world use exchange rates as a policy weapon, there could be a serious risk to global economic recovery.

Yesterday, South Korea was criticised by Japan after Finance Minister, Yoshihiko Noda, said that South Korea’s role as chair of next month’s G20 summit would be “seriously questioned” due to its “repeated interventions” to weaken the won.

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