South Korea's central bank freezes key rate for 10th month
South Korea's central bank on Thursday announced to keep the key interest rate at a record low of 2 percent for the 10th consecutive month, citing lingering doubts over an economic recovery.
The Bank of Korea (BOK), in a monthly policy meeting, decided to leave the benchmark seven-day repo rate frozen at a record low of 2 percent, as widely expected by local experts and media.
"The local economy is continuing with its recovery movement on the back of improvements in exports and domestic consumption, as well as a bounce back in the global economy. But at the same time there still lie uncertainties in the pace and path of the growth," the BOK said, as it explained the background of the rate freeze.
The South Korean economy, during the third quarter, rebounded to positive territory, with a gross domestic product (GDP) rising 0.9 percent from a year earlier, the BOK showed in its report.
Consumer prices, though accelerating in growth, have been stabilizing this year, with the November consumer price index expanding at 2.4 percent, below the government's target level, according to the BOK.
A surge in the nation's housing prices, which triggered BOK Governor Lee Seong-tae to hint at a possible rate hike in September, has been stabilized as well, growing 0.3 percent from a year earlier, the BOK said.
The local financial markets have mostly been under a stabilizing move, although uncertainties in foreign markets temporarily increased market volatility in recent days.
Despite of indicators in the real economic sector and financial markets underpinning optimism on the South Korean economy, the BOK said that it would maintain the current accommodating monetary policy stance, taking risks that remain in the global and domestic markets.
Local experts are divided over the timing of a possible interest hike, with some claiming it should come in the first quarter of 2010, while others saying it should be delayed till the first half of next year, local media said.
Amid a heated discussion on the issue, BOK Governor Lee Seong-tae said the bank will weigh the timing of a possible rate hike, adding that the process of normalizing the key rate needs to be gradual.
The BOK slashed the rate by a total of 3.25 percentage points between October 2008 and February in a bid to pull the sluggish economy out of the worst recession in a decade