Central Bank Holds Rate Steady

The Bank of Korea decided Tuesday to maintain the overnight call rate at 5 percent because of concerns on inflation and low real interest rates.

Explaining the decision, Chon Chol-hwan, the central bank governor, said "consumer prices rose 5.3 percent in April, so we decided to maintain the rate." Mr. Chon added that Korea's real interest rate, or the interest rate less inflation, is low compared with other industrialized countries and should not be trimmed to ensure that the unemployed and senior citizens can live off their interest income.

Mr. Chon said he expects the economy to rebound soon. "GDP growth looks unhealthy," he said, "but we expect it to pick up quickly in the second half if the U.S. economy improves and Japan's doesn't fall further." The economy shows no signs of heading toward stagflation, he added.