South Korea holds interest rate at record low 1.25%

[SEOUL] South Korea's central bank on Thursday kept its key interest rate unchanged at a record low 1.25 per cent as it monitors the impact of its surprise rate cut last month.

In a bid to stimulate local spending, the Bank of Korea cut its benchmark inter-bank lending rate by 0.25 percentage points in June after holding the rate for 11 straight months.

The latest decision came as Asia's fourth-largest economy struggles with growing jobless woes, mounting consumer debt and falling exports in the face of slowing global demand.

Exports, which account for nearly half of the country's economy, have fallen for 18 straight months.

The country's consumer prices rose only 0.9 per cent from a year earlier during the first half of this year, falling short of meeting the central bank's 2-per cent target rate for the 2016-2018 period.

Thursday's rate freeze was widely expected by analysts, with economists surveyed by Bloomberg News forecasting the BOK to hold the interest rate to monitor the impact of its June rate cut and the fallout from the UK's vote to leave the European Union.

Analysts, however, expect the BOK to revise downwards its growth projection for 2016.

The expectations come after governor Lee Ju Yeol noted in June increased risks for the second half of the year due to the restructuring of indebted companies and a slowdown in global trade.

Any changes to the growth forecast will be announced later on Thursday when BOK research officials give details about the quarterly economic outlook revision.

The central bank lowered its 2016 growth forecast to 2.8 per cent in April.

AFP