Bank of Korea removes 'policy of rate cuts'…leaves only 'possibility'

The Bank of Korea removed the expression 'will continue the policy of lowering interest rates' from its press release distributed after keeping the policy rate unchanged at an annual 2.50% at the Monetary Policy Committee's meeting on the direction of monetary policy on the 27th.

In the reference materials distributed that day, the Bank of Korea said, "Future monetary policy will keep open the possibility of lowering interest rates, while in this process closely examining changes in domestic and external policy conditions and the resulting growth and inflation trends, and financial stability conditions, and will determine whether and when to make additional cuts to the policy rate."

Until last month it used the phrase 'monetary policy will continue the policy of lowering interest rates to mitigate downside risks to growth,' but this time it replaced it with the term 'possibility.'

That day the Bank of Korea also newly revealed concerns about inflation. Last month it emphasized that inflation was stabilizing, but this month it mentioned that "the inflation rate has become somewhat higher." It raised this year's inflation forecast from 2.0% to 2.1%, evaluating that "it is somewhat higher than expected."

In the Seoul bond market that day, the yield on 3-year Treasury bonds began trading at around an annual 2.895% but rose to the 2.93% range after the rate decision statement was announced (bond prices fell).

Reporter Kang Jin-gyu josep@hankyung.com