South Korea's central bank yesterday promised to direct policy at shoring up the sputtering economy, adding to expectations it will cut interest rates next week.

The comment, contained in its policy report to Parliament, marked a shift in emphasis towards encouraging growth from its statement last month that had stressed price stability as the prime objective.

"The Bank of Korea plans to manage monetary policy for economic growth to recover to the potential rate, while ensuring inflation remains stable at the middle of the target range," the central bank said.

In July, the bank trimmed its policy rate by 25 basis points to 3 per cent in a surprise move, and has since kept it unchanged.

A private survey of South Korea's manufacturing sector, official inflation data and a housing price report, all for September and released yesterday, supported the case for policy easing at the central bank's Oct 11 meeting.

The HSBC/Markit purchasing managers' index on South Korea's manufacturing sector fell to a 43-month low of 45.71 in seasonally adjusted terms, marking the fourth consecutive month of contraction.

And though annual inflation last month picked up to 2 per cent from a 12-year low of 1.2 per cent in August, this was well below the central bank's 3 per cent target, providing room for additional easing.

Meanwhile, the country's top mortgage lender also released data highlighting weak consumer sentiment, with housing prices falling for a third consecutive month in September, marking the worst sequential decline since early 2009.

TODAY