November 11, 2004
The Bank of Korea
Monetary Policy Decision
The Monetary Policy Committee of the Bank of Korea decided today to lower its target for the benchmark call rate (uncollateralized overnight rate) from 3.5 percent to 3.25 percent for the inter-meeting period.
In a related action, the Committee lowered the interest rates on Liquidity Adjustment Loans and Aggregate Credit Ceiling Loans of the Bank of Korea by the same 25 basis points, respectively to 3.0 percent and 2.0 percent.
(An unofficial English translation based on the Korean original of the decision on monetary policy taken by the Monetary Policy Committee on November 11, 2004 is attached.)
In the real economy, private consumption and facilities investment have remained sluggish and both exports and construction investment show a slowdown in the pace of their expansion to some degree. This is giving rise to concern that the downside risk to the growth of the real economy may be increasing. Meanwhile, the current account is still in surplus, mainly thanks to the surplus on the goods account.
Although upward pressure on prices from the cost side still exists mainly due to the high oil prices, the core inflation rate remains within its target range owing to the subdued domestic demand.
In the financial markets, overall liquidity conditions have been favorable. However, fund-raising conditions have not improved for small- and medium-sized enterprises with low credit ratings as financial institutions are still acutely sensitive to credit risk.
Taking the above economic and financial conditions into consideration, the Monetary Policy Committee of the Bank of Korea decided today to lower its target for the benchmark call rate (uncollateralized overnight rate) from 3.5 percent to 3.25 percent for the inter-meeting period.