BOK may rejig rate-setting meetings

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BOK may rejig rate-setting meetings

The central bank is considering cutting back on the number of days that members of its monetary policy committee meet to set the benchmark borrowing rate.

Instead of holding monthly meetings, it is looking into revising the law so that the decision on the key rate would be announced on the same day as the central bank announces its economic outlook.

Currently, the Bank of Korea does this three times a year, in April, July and December.

The change comes as the central bank is taking flak for having negatively influenced the stock market for two straight days last week.

It drastically lowered its outlook for this year’s economic growth from an earlier projection of 3.5 percent to 3.3 percent, just one day after it shaved 0.25 percent point off the key borrowing rate for the first time since 2009 due to fears of a contracting economy.

After the monetary policy committee decided to slash the rate on Thursday last week, the market plunged 41 points to close below 1,800. When the outlook was revised the next day, it sent the market on a roller coaster ride.

However, after Beijing’s second-quarter growth results chided with the market’s general expectations, the Seoul bourse started to stabilize and closed up 27 points on the back of a buying spree by institutional investors.

China’s growth for the April-June period fell from the previous quarter to below 8 percent, but the risk of a hard landing for the world’s second-largest economy was reduced.

Industry insiders said there would have been less confusion in the market if the revised outlook was presented earlier, as the decision to lower the rate came as a surprise.

One central bank official said the BOK was keen to enhance communication with the market by providing information on the reasons behind the decisions. At present, it holds its monthly meetings on the second Thursday of each month.

In contrast, the U.S. Federal Open Market Committee members meet on eight Tuesdays a year at roughly six-week intervals. The European Central Bank’s governing council gathers once a month, while in turbulent Japan, central bankers get together to decide the rate 14 times a year.

The BOK may start announcing its benchmark rate on the same day that it reveals its economic outlook from as early as December.

By Lee Ho-jeong []
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