SEOUL, Oct 4 (Reuters) - South Korea's finance ministry said domestic economy would maintain growth through the next year and that raising interest rates would help strengthen the foundation for sustainable economic growth over the long term.
Monday's remarks on the economy and interest rate policy, contained in its report to the parliament, could be seen as indicating the ministry is not opposed to the central bank raising interest rates further over the coming months.
'Over the medium to long term, raising the (benchmark) base rate will help strengthen the foundation for sustainable growth by reducing the risks of higher consumer price growth and price bubbles,' the ministry said.
It referred to signs of slowing growth in the United States and China and a continued fiscal crisis in some European countries for an extended period as 'persisting risks', but sounded generally optimistic about the economic prospects.
The country's central bank surprised markets in July by raising interest rates slightly earlier than expected as sustained growth in Asia's fourth-largest economy increased the likelihood of inflation starting to build.
The Bank of Korea has held the base rate steady at 2.25 percent for the last two months on concerns about enlarged uncertainty in the global economy but is widely expected to raise the rate at least once more for the rest of this year.
(Reporting by Cheon Jong-woo; Editing by Yoo Choonsik and Jon Loades-Carter)
((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.
Monday's remarks on the economy and interest rate policy, contained in its report to the parliament, could be seen as indicating the ministry is not opposed to the central bank raising interest rates further over the coming months.
'Over the medium to long term, raising the (benchmark) base rate will help strengthen the foundation for sustainable growth by reducing the risks of higher consumer price growth and price bubbles,' the ministry said.
It referred to signs of slowing growth in the United States and China and a continued fiscal crisis in some European countries for an extended period as 'persisting risks', but sounded generally optimistic about the economic prospects.
The country's central bank surprised markets in July by raising interest rates slightly earlier than expected as sustained growth in Asia's fourth-largest economy increased the likelihood of inflation starting to build.
The Bank of Korea has held the base rate steady at 2.25 percent for the last two months on concerns about enlarged uncertainty in the global economy but is widely expected to raise the rate at least once more for the rest of this year.
(Reporting by Cheon Jong-woo; Editing by Yoo Choonsik and Jon Loades-Carter)
((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.