(LEAD) Bank of Korea freezes key rate for 12th month in Feb.

(ATTN: ADDS more details and statement by BOK in paras 3-5; TRIMS throughout)
By Kim Soo-yeon
SEOUL, Feb. 11 (Yonhap) -- South Korea's central bank froze its key interest rate
for the 12th straight month on Thursday as uncertainty about the pace of an
economic recovery lingered amid heightened global market jitters.

In a monthly policy meeting, the Bank of Korea (BOK) froze the benchmark
seven-day repo rate, dubbed the base rate, 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 2009 in a bid to bolster the slumping economy.
"The Korean economy will likely sustain its growth trend, but there is a
considerable degree of uncertainty over the growth path because of the
possibility that fiscal deficit problems in the euro-zone could bring about
financial market turbulence," the BOK said in a statement.
"Euro-zone debt fears have increased jitters in global markets, and South Korea's
economic growth and inflation have yet to be strong enough to warrant a rate
hike," said Im No-jung, an economist at Solomon Investment & Securities Co.
The rate freeze came as South Korea's economy has been on a recovery track, but
its growth slowed in the fourth quarter as exports and private spending declined
and fiscal spending waned. Asia's fourth-largest economy expanded 0.2 percent
on-quarter in the final quarter of 2009, sharply slowing from a 3.2 percent gain
in the third quarter.
Analysts said concerns about snowballing budget deficits in Greece and other
debt-ridden European countries added to uncertainties. European debt woes roiled
global financial markets last week, denting investors' appetite for risky assets.
Job markets also remained chilly with the country's jobless rate jumping to 5
percent last month, the fastest increase in almost nine years.
Experts said the BOK may not increase borrowing costs in the first half, due to
persisting economic uncertainty at home and abroad.
The country's vice finance minister attended January's rate-setting meeting as an
observer. It was the first time the government exercised its right to attended
the BOK's policy meeting in over 10 years, a move which experts say was aimed at
preventing the central bank from hiking the rate in the near term.
The government has forecast that the Korean economy will grow 5 percent this
year, but it has reiterated that it will stick to an "expansionary" policy for
the time being as the economic recovery has yet to gain a solid footing. It has
put priority on boosting job creation this year as the job market continues to
slump despite a rebounding real economy.
sooyeon@yna.co.kr
(END)

Delete & Prev | Delete & Next