Policy Planning & Coordination Division,
Monetary Policy Department,
The Bank of Korea
Tel : 822-759-4460
Fax : 822-759-4485

Monetary Policy in October 1999
(October 7, 1999)

* Unofficial English translation based on the Korean original that was decided upon by the Monetary Policy Committee on October 7, 1999)

     Recently, the real sector has been showing a trend of rapid expansion. However, the current account has remained in surplus and consumer prices have been mostly stable, although they have risen substantially since August influenced by floods and the rise in international oil prices.

     In the meantime, the financial market has been unstable due to soaring market rates and a plunge in stock prices precipitated by the increased repurchase of investment trust companies' beneficiary certificates. Despite the significant decline in long-term market rates thanks to the purchase of a large amount of bonds by the Bond Market Stabilization Fund, the uncertainties surrounding financial markets have yet to be resolved.

     Under these circumstances, the Monetary Policy Committee of the Bank of Korea has decided to maintain its current monetary policy stance in October, focusing on stabilizing the financial markets as in the previous month.

     To this end, overnight call rate will be maintained at around its current level.

     In order to ensure that financial institutions do not face difficulties in liquidity conditions and to promote the stability of the bond market, sufficient liquidity will be made available to the banks. Open market operations will be implemented in a flexible manner, giving due weight to financial market conditions.

     Efforts to reduce the fiscal deficit, meanwhile, need to be strengthened both to cope with an expected future increase in aggregate demand as a result of the continued economic expansion, and to help balance out supply and demand in the bond market.