SEOUL, March 30 (Reuters) - South Korea’s central bank said on Thursday the country’s stocks and bonds are set to see net inflows for a third straight month, quelling concerns over possible selloffs in the wake of the U.S. Federal Reserve rate hike earlier this month.
As of March 24, foreigners had bought a net 3.4 trillion won ($3.05 billion) worth of South Korean shares while they boosted their holdings of bonds by 1.1 trillion won, the Bank of Korea (BOK) said.
“Rate hikes by the U.S. Federal Reserve have the potential to lend hardship to our economy, but if they are carried out gradually the impact is not expected to be large,” the BOK said in a report to parliament.
The report added that outflow pressures would not be severe either if the Fed opted to raise interest rates gradually. But if the Fed’s actions were to cause financial jitters in other emerging market economies, risks could rise and add to outflow pressure, the BOK said.
The central bank report reiterated its view that South Korea’s economy would grow in the mid-2 percent range this year, but there were many uncertainties.
Inflation would be around 2 percent, the bank said, roughly in line with its 2 percent target.
Noting sluggish economic growth and mild inflationary pressure, the BOK said it would maintain its accommodative monetary policy stance. ($1 = 1,113.6700 won) (Reporting by Christine Kim; Editing by Eric Meijer)