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(2nd LD) BOK holds key rate steady at 1.25 pct in Oct.

All News 11:31 October 13, 2016

(ATTN: UPDATES with statement by monetary policy board of BOK)

SEOUL, Oct. 13 (Yonhap) -- South Korea's central bank held its policy rate steady for October on Thursday, extending its wait-and-see mode to four straight months after sending the key rate to a record low level to strengthen growth for Asia's fourth-largest economy.

In a widely expected move, the monetary policy board of the Bank of Korea (BOK) voted to keep the key rate at 1.25 percent.

In June, the central bank made a surprise rate cut, citing a need to support the economy.

South Korea's exports backtracked 5.9 percent from a year earlier in September due mainly to sluggish shipments of cars and mobile devices. Outbound shipments came to US$40.9 billion last month, down from $43.4 billion for the same month last year, according to government data.

(2nd LD) BOK holds key rate steady at 1.25 pct in Oct. - 1

The board said it forecast that the domestic economy will sustain its trend of modest growth going forward, due chiefly to a gradual recovery in global trade and to the effects of expansionary macroeconomic policies.

"However, in view of economic conditions domestically and abroad, it judges the uncertainties surrounding the growth path to be high," the board said in a statement.

The decision by the BOK board is in line with an earlier poll conducted by Yonhap Infomax, the financial news arm of Yonhap News Agency, in which all of the 14 economists surveyed forecast the central bank to freeze the key rate in October.

Bank of Korea Governor Lee Ju-yeol also said last week that the room to maneuver in monetary policy is "relatively limited," citing sharply increased household debt in Asia's fourth-largest economy.

South Korea's household debt reached an all-time high of 1,257.3 trillion won (US$1.11 trillion) as of the end of June due to record-low interest rates and strong demand for new apartments. It's one of the highest household debt levels in the world compared with income levels.

The board said it will closely monitor the trend of increased household debt, noting household lending has sustained a trend of substantial increase at a level exceeding that of recent years, led by mortgage loans.

The country's consumer prices rose 1.2 percent in September from a year earlier, marking the biggest gain since April when the prices increased 1 percent on-year, according to the central bank.

The BOK board said it forecast that consumer prices will gradually rise, due mainly to the disappearance of the effect of the temporary cut in electricity fees and to the rebound in international oil prices.


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