S. Korea keeps interest rate unchanged at 2.75%

South Korea's central bank kept its key interest rate unchanged at 2.75 percent following a cut last month, as Asia's fourth-largest economy showed small signs of recovering from a year-long slump.

The Bank of Korea had cut the rate by 25 basis points in October, the second policy easing in three months aimed at arresting a slowdown in the country's export-driven economy caused by the global downturn.

October exports grew 1.2 percent, after three months of contraction, but Bank of Korea governor Kim Choong-Soo on Friday said it was premature to signal a recovery given the ongoing eurozone crisis.

"The local economy is not likely to further worsen, but it is too early to say the economy is definitely recovering," Kim said.

He also spoke of the need for contingency plans in case the United States -- a key export market -- slips back into recession in the event the US Congress fails to agree on avoiding a so-called fiscal cliff at the end of the year.

South Korea's economy grew 0.2 percent in the third quarter to September from the previous three months -- the slowest pace in nearly three years as the eurozone crisis impacted on investment activity.

The inflation rate accelerated to 2.1 percent in October but remained comfortably within the central bank's 2.0-4.0 percent target range.

Factory output and exports improved marginally despite other aspects of the economy remaining sluggish, including consumption.

Industrial output showed a slight expansion in September from a month before, ending a three-month run of contractions.

Some analysts said the central bank might resume the monetary easing cycle in the first half of next year.

"It is now concerned about the weakening long-term growth trend. It will be inclined to counter it with additional monetary easing early next year," said Samsung Securities analyst Ryan Oh.

-- Dow Jones Newswires contributed to this report --

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