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(4th LD) BOK holds key rate steady at 1.25 pct in April

All News 15:57 April 13, 2017

(ATTN: UPDATES with details)

SEOUL, April 13 (Yonhap) -- South Korea's central bank on Thursday held its key rate steady for April to support the country's growth as it revised up the country's growth forecast for this year.

The Bank of Korea kept its policy rate at an all-time low of 1.25 percent for the 10th consecutive month in April after dropping the rate to its lowest level to bolster Asia's fourth-biggest economy.

BOK Gov. Lee Ju-yeol said there seems to be limited room for rate cuts, given the country's future growth path and consumer prices.

"Still, we will maintain the monetary easing stance to support growth due to uncertainties in trade terms and geopolitical risks," Lee said in a news conference, in an apparent reference to tensions over North Korea's missile and nuclear weapons programs.

The BOK's Monetary Policy Board said the domestic economy is likely to continue its trend of moderate growth going forward.

The BOK also raised its growth outlook for the country's gross domestic product to 2.6 percent for 2017, up 0.1 percentage point from its previous estimate released in January.

The BOK's revised growth projection is on par with forecasts made by the South Korean government and the International Monetary Fund, but is slightly higher than the 2.4 percent expansion estimate by South Korea's state-run think tank Korea Development Institute.

"The Korean economy is expected to continue its moderate growth this year, driven by improvements in exports and facilities investment thanks to the recovery of the global economy," the BOK said.

It also said economic growth in 2018 is projected to be 2.9 percent as the global economy continues to recover.

The board also vowed to closely monitor conditions related to trade with major countries, geopolitical risks, the progress of monetary policy normalization by the U.S. Federal Reserve and the trend of increases in household debt.

Last month, the U.S. Federal Reserve raised its key rate by a quarter of a percentage point to a target range of 0.75 to 1 percent. It also signaled that additional hikes would be made in a gradual manner later this year.

The BOK has said that the U.S. rate increase does not necessarily mean it will immediately raise its interest rates. The BOK does not hold a monetary policy meeting in March.

In June last year, South Korea's central bank made a surprise rate cut, citing a need to stimulate the lackluster economy amid a prolonged economic slowdown.

Separately, Lee said that South Korea is unlikely to be designated a currency manipulator by the United States, citing positive comments by U.S. President Donald Trump on China.

South Korea was put on a monitoring list by the U.S. Treasury Department last year along with other countries, due to a significant bilateral trade surplus with the United States and other factors. The U.S. government is expected to unveil a list of currency manipulators.

Lee's comments came after Trump said his administration won't label China a currency manipulator.

In an interview with the Wall Street Journal, Trump said Wednesday that China has not been manipulating its currency for months, and such a designation could also endanger his efforts to enlist Chinese help in dealing with North Korea over its nuclear weapons program. There had been concerns that South Korea could have been designated a currency manipulator if China were labeled as such.

entropy@yna.co.kr
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