SEOUL, Feb 10 (Reuters) - South Korea's central bank looks certain to hold interest rates steady at a record low for a 12th consecutive month on Thursday but may hint at a possible increase in the rates at any time, a Reuters poll showed this week.
South Korean policymakers remain cautious in formally exiting from the stimulus measures introduced since late 2008, but authorities in countries such as Australia, China and India have already started to take steps aimed at taming inflationary pressures as their economies recover.
Followings are key measures that the Bank of Korea, which sets interest rates but has no direct control on domestic financial institutions, introduced since late 2008 to keep money flowing through the financial system during the global economic crisis:
INTEREST RATES
- The base rate, a 7-day repurchase agreement rate, was cut to a record low of 2.00 percent from 5.25 percent between October 2008 and February 2009. This is reviewed every month.
- The interest rate on special loans for small and medium-sized enterprises (SMEs) was cut to 1.25 percent from 3.5 percent. This is reviewed every month.
WON LIQUIDITY
- The Bank of Korea accepted bonds held by local banks and certain government agency bonds -- in addition to government bonds -- as collateral for its reverse repurchase agreement deals. This measure expired in November 2009.
- In addition to commercial banks, 12 securities brokerages were allowed to participate in the central bank's repurchase agreement operations. This measure expired in July 2009.
- The central bank promised to provide up to 5 trillion won ($4.33 billion) via open market operations to financial institutions subscribing to a 10 trillion won fund aimed at boosting demand for bonds.
- The ceiling on special loans for SMEs has been raised to 10 trillion won from 6.5 trillion won. The central bank is due to review the ceiling in late March.
- The Bank of Korea paid local banks one-off interest of 500.2 billion won on their deposits put under the reserve requirement system.
- The government and the Bank of Korea decided to set up a fund to recapitalise local commercial banks by purchasing their subordinated bonds, hybrid bonds and preferred stocks.
FOREIGN EXCHANGE LIQUIDITY
- The Bank of Korea sealed a $30 billion currency swap with the U.S. Federal Reserve to help ease any temporary shortage at local banks. The deal expired this month.
- The Bank of Korea separately formed currency swap deals with central banks of Japan and China. The $20 billion swap deal with the Bank of Japan is due to expire in April this year.
- The yuan-won swap for up to 180 billion yuan ($26.37 billion) or 38 trillion won with the People's Bank of China is due to expire in December 2011.
- The Bank of Korea has provided a total of $26.6 billion to financial institutions through swap deals between late 2008 and early 2009.
($1=1156.1 Won, 6.826 Yuan)
(Reporting by Cheon Jong-woo; Editing by Yoo Choonsik)
((jongwoo.cheon@thomsonreuters.com; +82 2 3704 5665; Reuters Messaging;jongwoo.cheon.reuters.com@reuters.net)) Keywords: KOREA ECONOMY/POLICY (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
South Korean policymakers remain cautious in formally exiting from the stimulus measures introduced since late 2008, but authorities in countries such as Australia, China and India have already started to take steps aimed at taming inflationary pressures as their economies recover.
Followings are key measures that the Bank of Korea, which sets interest rates but has no direct control on domestic financial institutions, introduced since late 2008 to keep money flowing through the financial system during the global economic crisis:
INTEREST RATES
- The base rate, a 7-day repurchase agreement rate, was cut to a record low of 2.00 percent from 5.25 percent between October 2008 and February 2009. This is reviewed every month.
- The interest rate on special loans for small and medium-sized enterprises (SMEs) was cut to 1.25 percent from 3.5 percent. This is reviewed every month.
WON LIQUIDITY
- The Bank of Korea accepted bonds held by local banks and certain government agency bonds -- in addition to government bonds -- as collateral for its reverse repurchase agreement deals. This measure expired in November 2009.
- In addition to commercial banks, 12 securities brokerages were allowed to participate in the central bank's repurchase agreement operations. This measure expired in July 2009.
- The central bank promised to provide up to 5 trillion won ($4.33 billion) via open market operations to financial institutions subscribing to a 10 trillion won fund aimed at boosting demand for bonds.
- The ceiling on special loans for SMEs has been raised to 10 trillion won from 6.5 trillion won. The central bank is due to review the ceiling in late March.
- The Bank of Korea paid local banks one-off interest of 500.2 billion won on their deposits put under the reserve requirement system.
- The government and the Bank of Korea decided to set up a fund to recapitalise local commercial banks by purchasing their subordinated bonds, hybrid bonds and preferred stocks.
FOREIGN EXCHANGE LIQUIDITY
- The Bank of Korea sealed a $30 billion currency swap with the U.S. Federal Reserve to help ease any temporary shortage at local banks. The deal expired this month.
- The Bank of Korea separately formed currency swap deals with central banks of Japan and China. The $20 billion swap deal with the Bank of Japan is due to expire in April this year.
- The yuan-won swap for up to 180 billion yuan ($26.37 billion) or 38 trillion won with the People's Bank of China is due to expire in December 2011.
- The Bank of Korea has provided a total of $26.6 billion to financial institutions through swap deals between late 2008 and early 2009.
($1=1156.1 Won, 6.826 Yuan)
(Reporting by Cheon Jong-woo; Editing by Yoo Choonsik)
((jongwoo.cheon@thomsonreuters.com; +82 2 3704 5665; Reuters Messaging;jongwoo.cheon.reuters.com@reuters.net)) Keywords: KOREA ECONOMY/POLICY (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.