Division within the Bank of Korea deepened when three out of seven board members called for a reduction in interest rates this month, while the majority voted for no change, minutes released today show.
The three supporters of a 25-basis-point cut were Chung Hae Bang, Ha Sung Keun and Chung Soon Won. The monetary policy committee was split four-three for the first time since August 2006, according to the central bank. At previous meetings this year, only Ha called for a reduction.
The Bank of Korea held borrowing costs unchanged at 2.75 percent for a sixth month on April 11, resisting government pressure for a reduction. The nation’s biggest decline in industrial output in a year, reported today, may fuel calls for monetary loosening to accompany fiscal stimulus as weakness in the yen threatens the nation's exports.
“The split, combined with the poor industrial output data, will apparently rekindle the debate on a rate cut,” said Yoon Yeo Sam, an analyst at Daewoo Securities Co. in Seoul. “The four-to-three split means only one vote is needed for a rate cut, which may happen in May.”
Of those who called for a cut, Chung Hae Bang is a former official at the Ministry of Planning and Budget, who was recommended for the policy board by the finance minister. Ha was recommended by the nation’s financial regulator. Chung Soon Won is a former Hyundai Motor Co. president and was recommended by the Korea Chamber of Commerce and Industry.
One board member cited a weak yen and a slow global economic recovery as reasons for a reduction, according to the minutes.
-- Editors: Paul Panckhurst, Stephanie Phang