South Korea freezes key rate for 11th month
2012-05-10 16:02:45
South Korea's central bank Thursday froze its key interest rate for the 11th straight month, as inflation eased and growth remained solid despite new eurozone debt crisis fears.
The Bank of Korea (BoK) kept the base rate at 3.25 percent, where it has stood since a 25-basis-point rise in June last year. Annual inflation in April eased to 2.5 percent.
The bank said risks to global economic recovery include "the resurgence of sovereign debt problems in Europe stemming from the heightening of political uncertainty" -- a reference to French and Greek elections that anti-austerity parties won.
It also highlighted a deepening economic slowdown in the continent and geopolitical risks in the Middle East, including the international standoff over Iran's nuclear programme.
South Korea's export-dominated economy has "faltered", it said in a statement, with consumption and investment decreasing even though exports were generally holding up.
But the bank hailed a rise in new jobs as a positive sign and said the country should be able to achieve steady growth. Its forecast for this year is 3.5 percent growth, down from 3.6 percent in 2011.
"Inflation is cooling and renewed European sovereign debt tension threatens the Korean growth outlook, but it's not enough to prompt the BoK to lower interest rates," Moody's Analytics said in a commentary
The country's "solid growth" was staying the bank's hand, it said, even though downside risks to growth were mounting.
"Political tension in Greece, and a vote against austerity in recent French elections, threatens to exacerbate Europe's debt crisis," it added.