South Korea central bank chief: monetary policy chained only to inflation undesirable

Lee Ju-yeol (C), 61, central bank governor, answers reporters' questions as he is surrounded by medias after a news conference in Seoul March 3, 2014. REUTERS/Kim Hong-Ji

SEOUL (Reuters) - The governor of Bank of Korea said on Wednesday that tying monetary policy only to an inflation target could be undesirable as falling inflation placed the central bank under pressure to cut interest rates further.

"It could be undesirable to manage monetary policy solely to achieve the inflation target at a time when inflation has been consistently low due to supply factors," BOK Governor Lee Ju-yeol said in his New Year's address.

The central bank set at the end of 2012 a target to keep inflation between 2.5 percent and 3.5 percent on average during the 2013-2015 period. Inflation averaged 1.3 percent in both 2013 and 2014, led by falling raw materials prices.

The BOK targets inflation as its monetary policy framework and says its other main objective is to maintain financial stability.

(Reporting by Christine Kim; Editing by Choonsik Yoo and Richard Borsuk)

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