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South Korea's central bank plans to focus its 2013 monetary policy on supporting
the economic recovery and promoting financial stability by closely watching
economic conditions at home and abroad, its chief said Monday.
"The
global economy and the Korean economy are not likely to markedly improve in
2013. But at the same time, pessimistic economic views are not likely to
prevail," Bank of Korea (BOK) Gov. Kim Choong-soo said in his New Year's
message.
"The BOK plans to focus its monetary policy for 2013 on
promoting financial stability, supporting the economic recovery and helping the
underprivileged while firmly maintaining price stability."
His remarks
are in line with the BOK's 2013 monetary policy report that was unveiled last
week. The central bank said it will make efforts to prevent low growth from
continuing to erode the country's growth potential.
His remarks came
as the Korean economy is likely to grow some 3 percent next year, running below
its long-term potential growth rate of around 3.8 percent. The central bank said
that inflation is likely to grow 2.7 percent next year, picking up from this
year's estimate of a 2.3 percent rise.
The BOK cut the key rate in
July and October to 2.75 percent in a bid to help foster growth. The governor's
remarks give weight to the bet by market players that the BOK may cut the rate
again next year when the new government will be inaugurated, analysts
say.
The governor also stressed the need to take into account
targeting nominal gross domestic product (GDP) as its monetary policy target,
instead of the current inflation targeting.
"It is too early to say
that targeting nominal GDP is better than inflation targeting, but it is certain
that it may be not desirable for a central bank to stick to a single yard in
managing (the monetary) policy," Gov. Kim said.
Ensuring price
stability is the main policy mandate for the BOK though the role of promoting
financial stability was given to the central bank late last year.
But
some experts raise the validity of inflation targeting as the central bank
cannot help raising the interest rate when prices are skyrocketing, driven by
supply shocks, even in the face of the slowing economy.