South Korea leaves interest rate at record low

[SEOUL] South Korea's central bank left its benchmark interest rate unchanged at a record low of 1.5 per cent for a sixth consecutive month on Thursday, ahead of an anticipated rate increase by the US Federal Reserve.

The decision had been widely expected with the Bank of Korea's (BOK) board members adopting a wait and see approach to the impact of an eventual Fed hike on the global economy.

Earlier this month, the bank said South Korea's economy had grown at its fastest pace in more than five years in the third quarter, driven by a strong rebound in consumer spending.

"The domestic economy isn't at a situation where the BOK needs to change monetary policy, especially ahead of the Federal Reserve meeting," Seo Hyang Mi, a Seoul-based fixed-income analyst for HI Investment and Securities Co, told Bloomberg News.

"With the Fed's decision likely to increase financial market volatility and Korea's household debt rising, I don't think the BOK would cut interest rates in the foreseeable future as it would exacerbate the problems," Seo said.

The Federal Open Market Committee will hold its last meeting of the year next week and is widely expected to raise the US benchmark federal funds rate, which has been held near zero since late 2008.

Asia's fourth-largest economy expanded by 1.3 per cent in the July-September period, the fastest on-quarter growth since the second quarter of 2010.

The Bank of Korea has predicted GDP growth of 2.7 per cent for the whole of 2015.

AFP