S. Korea indicates reservation about further rate cut despite uncertainties

South Korea's top central banker on Thursday indicated his reservation about further rate cut despite lingering uncertainties at home and abroad.

Bank of Korea (BOK) Governor Lee Ju-yeol told reporters after the regular rate-setting meeting that stable risk management would be important as damaged financial stability can affect growth and inflation.

His comments came in response to the demand by a state-run think tank that the already record-low interest rate be lowered further to boost economic growth and headline inflation.

The South Korean economy is faltering on sagging exports and weaker sentiment among consumers and businesses, which came partly from political turmoil after President Park Geun-hye was impeached last week.

The BOK is under pressure to cut rates further amid remaining uncertainties at home and abroad, but pressure is expected to be put on the bank to raise borrowing costs given that the U.S. Federal Reserve lifted its benchmark rate overnight by a quarter percentage point.

The Fed hinted at rate hikes three times in 2017, but Governor Lee forecast that abrupt foreign capital outflow would not happen in the near future thanks to its strong capability to repay foreign debts.

The central banker said his country has sufficient foreign currency liquidity, ample foreign reserves and the current account surplus.

The South Korean central bank kept its benchmark interest rate on hold at an all-time low of 1.25 percent, maintaining its wait-and-see mode for six months in a row.

The governor noted that the bank's future monetary policy would be centered more on financial stability though it would maintain an accommodative policy stance. Endit