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Central bank of South Korea to focus policy on boosting growth

SEOUL -- South Korea's central bank said Tuesday it would focus its monetary policy on boosting economic growth, raising prospects of an interest rate cut as new data pointed to a deepening manufacturing slump.

The Bank of Korea “plans to operate the rate policy to ensure that the economy recovers its potential level of growth, the bank said in its biannual monetary policy report.

South Korea's export-driven economy has faltered in recent months, as the global economic downturn — and in particular the crisis in the eurozone — has hit overseas shipments.

Korean exports fell year-on-year for the third consecutive month in September while manufacturing activity in the same month contracted at the sharpest rate for nearly four years.

The HSBC Purchasing Managers' Index for September — released Tuesday — stood at a seasonally adjusted 45.7 in September, compared with 47.5 the previous month.

A reading above 50 indicates expansion in manufacturing activity, while a reading below that level signals contraction.

The central bank confounded expectations by keeping its key policy rate unchanged at 3.0 percent last month, despite mounting pressure for a cut to push back against slowing growth.

Last month, the International Monetary Fund lowered its growth outlook for South Korea to 3.0 percent from a previous estimate of 3.25 percent, citing the eurozone crisis and household debt.

Inflation accelerated to 2.0 percent in September but remained below the central bank's 3-percent target ceiling, paving the way for a rate cut as early as next week, analysts said.

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