Bank of Korea freezes key rate for 9th monthBy Kim Soo-yeon

SEOUL, Nov. 12 — South Korea's central bank froze its key interest rate for the ninth straight month on Thursday, saying that although the local economy is recovering more evidently, uncertainty persists.

In a monthly policy meeting, the Bank of Korea (BOK) left the benchmark seven-day repo rate unchanged at a record low of 2 percent, as widely expected. It cut the rate by a total of 3.25 percentage points between October 2008 and February in a bid to put the brakes on a sharp economic freefall.

"It has recently been more evident that economic activity is in a recovery phase," the BOK said in a statement.

"The Korean economy is likely to continue to maintain its positive on-quarter growth as the global economy is improving and inventories are being restocked, but uncertainty for growth persists due to factors like the spread of Influenza A."

The central bank said it will maintain its accommodative policy stance for the time being by focusing on sustaining the economic recovery.

A set of economic data are underpinning optimism that the Korean economy is recovering at a faster-than-expected pace compared with other major economies.

Asia's fourth-largest economy grew 2.9 percent in the third quarter from three months earlier, the fastest quarterly expansion in more than seven years. South Korea's industrial output expanded 11 percent in September from a year earlier, the fastest annual pace since January 2008.

The Korea Development Institute, a state-run think tank, said this week the economy remains in a "recovery phase" as exports and consumption are rebounding fast.

But despite the upbeat readings, the government and the central bank have cast cautious outlooks for the economy, citing persisting economic uncertainty at home and abroad.

A strong third-quarter economic performance was mainly driven by a wrap-up in inventory adjustment, and the economy is widely expected to lose steam in the fourth quarter due to the waning effects of fiscal spending.

Many economists have predicted the central bank will leave the rate unchanged throughout this year and that any potential rate increase would likely come in the first quarter of next year.

"Due to economic uncertainty at home and abroad, a possible rate hike may come in the first quarter of next year after the central bank assesses the pace of economic recovery," said Oh Chang-sup, an economist at IBK Securities.

In September, BOK Gov. Lee Seong-tae hinted that the bank could hike the rate if housing prices continue to rise, but he softened his tone last month, saying that his remarks in September did not mean an imminent rate increase — a signal that the BOK would not be in a hurry to tighten its monetary policy.

The government has reiterated that it will maintain its expansionary macroeconomic policy stance until a sustainable economic recovery is assured. (PNA/Yonhap)

DCT/mec

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