BOK chief at ease with Fed tapering

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BOK chief at ease with Fed tapering

Bank of Korea Gov. Kim Choong-soo has expressed confidence that Korea can minimize the impact of the U.S. Federal Reserve scaling back its stimulus program.

The governor said yesterday that Korea is not likely to experience the severe currency fluctuations seen in emerging markets like India because the country’s macroeconomic indexes - growth, inflation, employment and current account balance - are improving.

“Unlike other emerging countries, our current account balance has been posting surpluses for 17 consecutive months, and although it is still our task to fulfil the nation’s economic potential, the economy is on a growth path,” Kim said. “I don’t need to mention how sound the labor market is.”

He added that Korean authorities have implemented policies and regulations to help prevent instability caused by an exit of foreign capital.

“We have somewhat enough safety instruments, including the bank tax, foreigners’ bond investment and forward exchange position regulations,” Kim said. “Additionally, we have appropriate level of foreign reserves.”

The central bank governor’s comments came after markets across the globe were shaken when Charles Evans, president of the Federal Reserve Bank of Chicago, said earlier this week it is possible the Fed may start dialing back its bond-purchase program as soon as mid-September.

The comment unsettled global markets fearing an exit of foreign capital from emerging markets.

During his press conference yesterday, Kim stressed that the Korean financial market and its currency have remained stable in the past month, indicating that financial safety regulations are working properly and confidence in Korea’s macroeconomic progress is strong.

Meanwhile the Korean central bank held its benchmark interest rate at 2.5 percent. The decision was unanimous, according to the governor.

The rate has remained unchanged since the central bank lowered it from 2.75 percent in May to support government efforts to stimulate the economy. As a result, Korean GDP saw its best quarterly growth in two years.

Most market experts project that the central bank will likely maintain the rate until at least the second half of next year.


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