(2nd LD) Bank of Korea freezes key rate for 12th month in Feb.

(ATTN: RECASTS lead; UPDATES with remarks by BOK Gov. in paras 2-4,7-8; 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 and signaled that it would keep the
easing policy for the time being amid growing economic uncertainties.
Bank of Korea (BOK) Gov. Lee Seong-tae said if clear signs that the economy has
stabilized appear, the bank will raise the borrowing costs.
"As the Korean economy has yet to be on a solid footing, the central bank plans
to 'cautiously' keep the accommodative stance," Lee told a press conference after
the bank kept the benchmark seven-day repo rate at a record low of 2 percent.
"But the BOK will manage the policy by closely watching possible side effects the
low rates could have on the economy."
South Korea's economy has been on track to recovery, but recent concerns about
snowballing fiscal deficits in some European countries and China's tightening
fears amplified economic uncertainties, prompting policymakers to be cautious
about the pace of an economic recovery.
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.
But Lee downplayed the impacts of the euro-zone debt fears on the Korean economy.
"Economic uncertainties persist, but not to the extent which they would severely
hurt the growth forecast," the governor said, adding that the Korean economy is
expected to grow modestly this year.
A set of economic data indicated that the Korean economy is recovering on the
back of improving exports and domestic demand although its growth slowed down in
the fourth quarter.
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 attend 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)