central bank-low rates

SEOUL, March 22 (Yonhap) -- South Korea's top central banker said Friday that there are some concerns in the global financial markets that a long streak of low rates could spark unintended problems.

"Some heads of global investment banks express concerns over when the global economy will recover. But others said that a long streak of low rates could bring about problems that we never expected," Bank of Korea (BOK) Gov. Kim Choong-soo told heads of local banks.

Kim cited the risks of sparking bubbles as the case in point for such problems.

His remarks came as analysts are divided over whether the BOK will cut the key interest rate at April's rate-setting meeting.

The remarks appeared to be in response to market players' strong bets on a rate cut as early as April.

"The governor's wording seems to be hinting at a rate freeze. But market players are awaiting the depth of the government's economic stimulus packages to gauge the BOK's next move," said Yoon Yeo-sam, a fixed-income analyst at Daewoo Securities Co.

Shrugging off the governor's remarks, bond futures gained ground on foreign investors' purchases and growing appetite for safe assets.

Bond prices, which move inversely to yields, ended higher as the return on three-year Treasuries shed 0.01 percentage point to end at 2.58 percent.

More experts are tipped to a rate cut, saying that the BOK will take actions after taking into account the government's stimulus measures.

The government is seeking to draw up an extra budget worth about 10 trillion won (US$8.95 billion) to prop up the economic growth.

The central bank froze the benchmark seven-day repo rate at 2.75 percent for the fifth straight month in March.

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