[Yonhap Photo]
South Korea's central bank chief mentioned a possible shift in monetary policy for the first time in a year as the new government of President Moon Jae-in calls for expanded fiscal spending to revitalize Asia's fourth-largest economy which now shows signs of quick recovery.
The Bank of Korea (BOK) has kept its key rate steady at 1.25 percent since June last year when it made a surprise rate cut, citing a need to stimulate the lackluster economy and spur consumption amid a prolonged economic slowdown. It predicted the economy would grow 2.6 percent this year, compared to a 2.8-percent expansion last year.
This year there have been signs of faster economic recovery than predicted earlier, and BOK Governor Lee Ju-yeol suggested Monday that the central bank could think about a change in its monetary policy if the economy shows "clear" signs of recovery.
"If the economic situation improves more clearly with sustained economic recovery, it may be necessary to think carefully about adjustment in our monetary policy easing," he said. It's still unclear whether he was referring to a rate increase.
"The recovery in consumption is still moderate, but we believe the economy is picking up thanks to a rapid increase in exports and strong investments," Lee said, adding this year's growth rate is expected to exceed an earlier forecast. "Growth will be even greater if measures are taken to increase fiscal spending by the new government."
Moon took office last month with a pledge to get 10 trillion won ($8.9 billion) in this year's extra budget to help create new jobs mainly in the public sector. He has also promised to increase spending on welfare.
Lim Chang-won = cwlim34@ajunews.com
reporter
Park Sae-jin
swatchsjp@ajunews.com
