April 13, 2017 / 3:22 AM / 3 months ago

HIGHLIGHTS-Bank of Korea Governor Lee's comments at news conference

3 Min Read

(Updates with more comments from the BOK governor)

SEOUL, April 13 (Reuters) - South Korea's central bank kept interest rates unchanged for a 10th straight month on Thursday, wary of geopolitical risks around North Korea and ahead of a much-anticipated U.S. Treasury report on foreign currency policy.

Following are key remarks from Bank of Korea Governor Lee Ju-yeol's news conference, translated by Reuters:

Rate Decision:

"The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.25 percent for the intermeeting period."

Economy:

"Looking at the real economy, growth has expanded somewhat even though consumption remained weak."

"Exports and facility investment are leading the economic recovery."

"The prospects for economic recovery are bright short-term, but there are plenty of uncertainties (ahead).

"Geopolitical risks have increased financial market volatility recently."

"While price volatility has expanded in the financial markets, what will happen next depends on how the situation unfolds. So even for me it's hard to see the direction (for the economy) from geopolitical risks."

"While the CDS premium has risen somewhat of late, its not a huge increase so its premature to link this to rumours about an economic crisis coming in April."

"The main reason (behind the recent rise in credit default swap premiums) is with higher demand for CDS for hedging purposes among foreign investors who bought Korean bonds as local banks and companies have been increasing offshore bond issuance."

"It's difficult to expect current job growth to be maintained, given that it's mainly the IT sector that's doing well under improving exports and facilities investment, where the production base is mostly abroad.

"The situation with China is deteriorating also, so I expect related sectors to experience some hardship in employment conditions."

Monetary Policy:

"The need to cut interest rates has diminished compared with before. But as there are geopolitical risks and other uncertainties; we will keep (monetary policy) accommodative to continue to support the economic recovery."

Inflation:

"I’m not too concerned about inflation growing sharply like it did before, as price pressure isn’t that big." (Reporting by Cynthia Kim; Editing by Sam Holmes and Eric Meijer)

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