Bank Of Korea Hints At Rate Hike In 2010

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South Korea's central bank will adjust the pace of its accomodative monetary policy in 2010, the Bank of Korea Governor Lee Seong-tae said in his New Year message.

"For the time being, the central bank plans to manage the policy rate in a way that will help boost the economic recovery," Yonhap News Agency quoted Lee. He did not reveal the timing of the first rate hike.

He said there is a need to underpin growth momentum of the private sector by maintaining the accommodative stance. "But we must also be careful of the problems that a long-standing accommodative policy could bring upon the economy," Lee added.

The South Korean central bank maintained its base rate at a record low of 2% for the 10th straight month in December after cutting it by a total of 3.25 percentage points between October 2008 and February in a bid to shore-up the economy.

The nation's economy expanded 3.2% year-on-year in the third quarter. The central bank expects the economy to grow 0.2% in 2009 before expanding by 4.6% in 2010. Meanwhile, the government sees 5% growth next year.

Moreover, Lee said he expects inflationary pressure to increase in the second half of next year. The central bank's inflation target for 2010 to 2012 is fixed in the 2% to 4% range.

Earlier on Thursday, official data showed that South Korea's inflation climbed to 2.8% in December from 2.4% recorded in November.

South Korea's central bank will adjust the pace of its accomodative monetary policy in 2010, the Bank of Korea Governor Lee Seong-tae said in his New Year message. (Market News Provided by RTTNews)