Fri, Jun 12, 2009 - Page 11 News List

South Korea freezes key rate, BOK says downturn is over

AFP , SEOUL

South Korea’s central bank froze its key interest rate for the fourth straight month yesterday, saying the country’s economic downturn had ended.

At its monthly policy meeting, the Bank of Korea (BOK) left the benchmark seven-day repo rate unchanged at 2 percent.

The bank had made six consecutive rate cuts totaling 3.25 percentage points between October and February to prop up the export-dominated economy as overseas markets shrank.

Recent business indicators show the domestic economic downturn has ended, but it is unlikely to recover quickly due to the global slowdown, BOK Governor Lee Seong-Tae said.

It was too early to be sure of continued growth in the economy, he said.

“Upside risks to inflation inched up but the bank will maintain its accommodative stance,” Lee said.

The bank said in a statement that the slump in domestic demand had moderated and production activities had improved.

“The downside risk to economic growth, however, is thought to persist because of a rise in international raw material prices and the slowdown in major advanced countries,” the bank said.

Inflation has been moderating due to easing demand stemming from a slowing economy and gains in the won against the dollar, the statement said.

South Korea narrowly avoided falling into recession in the first quarter, when the economy grew 0.1 percent quarter-on-quarter following a 5.1 percent contraction from October to December.

The BOK has predicted negative growth of 2.4 percent for this year.

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