BOK plans cautious approach to rate policy

South Korea's central bank said Thursday it plans to take a cautious approach to managing rate policy by considering risk factors at home and abroad due to greater economic uncertainty. The Bank of Korea (BOK) said in a monetary policy report that it will focus its monetary policy on further stabilizing prices while sustaining economic growth. "Under this policy direction, the BOK plans to be cautious in managing the rate policy by closely monitoring economic conditions at home and abroad as uncertainty on the path to growth has heightened recently," it said. The report came as more experts are betting that the BOK will freeze the key rate at 3.25 percent for the rest of this year due to the bleaker global economic outlook. Global financial markets have underwent gyrations as a sputtering U.S. economy and the eurozone debt crisis are sparking fears about a global economic recession. BOK Gov. Kim Choong-soo told lawmakers on Tuesday that downward risks are viewed as being predominant due to concerns about the sluggish growth of advanced countries and the spread of the eurozone sovereign debt problems. The BOK said it will take actions swiftly, if necessary, after closely monitoring Europe's debt problems, fund flows in the local financial markets and household debt. The central bank said that Europe's debt crisis is likely to be the main cause of uneasiness in the global financial markets for a considerable period of time. "The region's fiscal woes cannot be solved in the short term and there is a high chance that tensions surrounding how to rescue debt-ridden countries will likely continue to flare up," it added. The BOK said monetary policy stances by emerging countries, including Korea, are considerably accommodative, given their economic fundamentals. "The reason why policy stances by most emerging countries are still accommodative is that each country has been prudent in managing the rate policy due to high economic uncertainty," the BOK said. Touching inflationary pressure, the bank said that consumer inflation will likely remain at a high level for the time being, due mainly to inflation expectations. "Core inflation is expected to continue to keep its upward momentum for the time being," it added. Core inflation refers to inflation, which excludes volatile oil and food prices. Consumer prices jumped 5.3 percent in August from a year earlier, surpassing the upper ceiling of the BOK's 2-4 percent inflation target range for the eighth straight month.