South Korea keeps interest rate at record low

[SEOUL] South Korea's central bank kept its key interest rate unchanged at a record low 1.5 per cent for a seventh straight month Thursday, following the US Federal Reserve's recent rate increase and amid slowing growth in key export markets.

The decision had been widely expected as analysts forecast the Bank of Korea's board members would extend a wait-and-see approach ahead of another possible US rate hike.

Governor Lee Ju-Yeol is starting off the year with the task of spurring South Korea's low inflation rate to a new 2.0 per cent target, as Asia's fourth-largest economy seeks to end a year-long exports slump.

The bank has less room for additional monetary easing from its current record-low rate, with skyrocketing household debt and greater risk of capital outflows following the US rate hike.

A slowdown in top export market China is also a cause for concern.

"The BOK wouldn't want to go in the opposite direction of the Fed and would prefer to stand pat amid current global market uncertainties," Stephen Lee, a Seoul-based economist for Samsung Securities Co, told Bloomberg News before the decision.

The US Fed is set to hold a rate-setting meeting later this month and again in March.

AFP