Bank of Korea tipped to freeze key rate for Sept.

SEOUL, Sept. 6 (Yonhap) -- South Korea's central bank is widely expected to hold
its key interest rates steady for September amid no clear signs of an economic
recovery and tamed inflation, analysts said Sunday.
Bank of Korea (BOK) Gov. Lee Seong-tae and his six fellow policymakers are
scheduled to hold a rate-setting meeting on Thursday. The seven-day repo rate has
been frozen at 2 percent since March.
The prediction of a rate freeze is grounded on an assessment that the South
Korean economy, Asia's fourth-largest, has yet to show more signs of a rebound
from its recent slump.
In the second quarter, the country's gross domestic product expanded 2.6 percent
from three months earlier, but contracted 2.2 percent from the same period a year
earlier.
On top of that, corporate capital spending tumbled 15.9 percent on-year, goods
exports fell 4.2 percent and the number of employed people dropped 0.3 percent,
according to government data.
"We need to watch the economy's third-quarter performance more closely as the
record for the second quarter was boosted by tax benefits and increased fiscal
spending," a central bank official said.
South Korea's consumer inflation remained relatively low at 2.2 percent in
August, though it grew at the fastest pace in three months.
Market watchers expect a debate over a rate increase to heat up starting in October.
After August's rate-setting meeting, BOK Gov. Lee hinted at considering a rate
hike from the fourth quarter, saying the "central bank will keep a wary eye on
economic trends during the third quarter."
Most analysts predict the central bank will mull reducing the benchmark interest
rate during the October-December quarter.
"If the third-quarter growth rate exceeds 1 percent, it will give the BOK room to
cut interest rates," said Yang Jin-mo, an analyst at SK Securities Co. "The
central bank may conduct a rate cut in November."
(END)