The South Korean Central Bank May Start Considering Raising Rates

Daily Forex Fundamentals | Written by ecPulse.com | Oct 16 09 08:48 GMT |

The South Korean central bank may consider raising rates in the up coming months after the bank maintained it at record low for a long period at 2.00% in order to give the needed support to the economy. But for while now the economic conditions in South Korea began stabilizing as government spending throughout the 76 trillion won continues to sustain domestic consumption and companies access to liquidity, managing to avoid the deterioration in several important sectors in the economy. With the big recovery seen by the Chinese economy, demand on the South Korean exports starting improving, which helped the economy avoid falling into recession during the first quarter of this year when it recorded a growth rate by 0.1%. while in the second quarter it recorded a growth rate by2.6%, the fastest growth rate in six years. South Korea's central bank governor said that the bank might start raising rates faster than usual, as the bank used to increase rates only by 25 basis points. He also noted that the bank will adjust its outlook on the economy before making any new decisions on the amount of increase in interest rates. There were also some remarks made by the Minister of Finance, through which he pointed out that the South Korean economy will strengthen even more by next year, supported by the rising global demand. For now, the economy is still facing many economic challenges, which might increase the uncertainties regarding the future of the economy. Yet with the positive pattern seen in global demand, exports are expected to moderate, being able to able to support the South Korean economy again. As a result confidence in the country increased, especially with the continued support fr5om the government stimulus plans and the reductions in interest rates, that led to the recovery in the stock markets. The Kospi index rose more than 47% during this year, after increased expectations that the South Korean economy was able to overcome the global economic crisis. The government now expects in 2009 a contraction less than 1.0%, compared with the previous expectations of -1.5%. Yet the central bank expects the economy to shrink this year by 1.6%, and grow by 3 to 4% in 2010. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk