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South Korea's inflation target for the 2010-2012 period has been fixed in the 2% to 4% range so as to offer greater flexibility in monetary policy setting amid an uncertain economic outlook, the Bank of Korea announced on Thursday. The bank had set a narrower 2.5% to 3.5% inflation target in the 2007-2009 period.
The central bank said there is a high chance that uncertainty would worsen as conditions surrounding inflation would be different from the period before the global financial turmoil. Further, the BoK considered the need to secure more flexibility for managing the monetary policy from the mid-and-long-term perspective.
"If a need arises to adjust the inflation target owing to factors such as unexpected foreign and domestic economic shocks, or changes in economic conditions, it will be reset in consultation with the government," the central bank stated. Further, the bank announced that it would review the performance of inflation targeting annually and make a public announcement of the results.
The central bank decided to retain the benchmark interest rate at a record low of 2% for the ninth straight month in November, but is widely expected to raise borrowing costs as early as the first quarter of next year.
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