(ATTN: UPDATES more details)
By Kim Kwang-tae
SEOUL, July 13 (Yonhap) -- South Korea's central bank on Thursday revised up the country's growth forecast for this year as it held its key rate steady for July to boost domestic consumption.
In a widely expected move, the monetary policy board of the Bank of Korea (BOK) unanimously voted to keep the key rate at 1.25 percent, extending its wait-and-see approach for the 13th consecutive month.
In June last year, South Korea's central bank made a surprise rate cut, citing the need to stimulate the lackluster economy amid a prolonged economic slowdown.
The BOK raised its growth outlook for the country's gross domestic product to 2.8 percent for 2017, up 0.2 percentage point from the central bank's estimate released in April.
The central bank also said it expects the Korean economy to grow 2.9 percent in 2018 on the back of global economic recovery and increased domestic spending.
BOK Gov. Lee Ju-yeol said the latest revision did not take into account the extra budget of 11.2 trillion-won (US$9.83 billion) being sought by the government.
The government submitted the extra budget to the National Assembly in June, though parliament has yet to review the bill due to a political standoff.
The BOK said the extra budget, if implemented, could further raise its growth outlook for this year's GDP, but cautioned that Chinese economic retaliations could weigh on South Korea's economic growth.
Last week, leaders of South Korea and China failed to resolve the dispute over the deployment of an advanced U.S. missile defense system in South Korea.
Seoul and Washington said the Terminal High Altitude Area Defense system is only meant to counter North Korea's evolving nuclear and missile threats. But China has imposed restrictions on South Korean imports and banned the sale of group tour packages to the Asian neighbor, claiming the U.S. missile system could hurt its security interests.
"The solid trend of domestic economic growth could continue, though there could be changes in conditions related to trade with major countries and geopolitical uncertainty," Lee said in a news conference, an apparent reference to tensions brewing over North Korea's nuclear and missile programs.
The policy board said exports will sustain their trend of improvement, thanks chiefly to the global economic recovery, and domestic demand activities will also recover moderately.
South Korea's exports came to US$51.4 billion in June, up from $45.2 billion tallied a year earlier, according to the Ministry of Trade, Industry and Energy.
The BOK board said it will implement monetary policies to ensure that economic growth continues and consumer price inflation is stabilized at the target level over the medium-term horizon, while maintaining financial stability.
"As the inflationary pressures on the demand side are not expected to be high even though the domestic economy is expected to show solid growth, the board will maintain its stance of monetary policy accommodation," the rate-setting body said in an English-language statement.
The BOK board also vowed to closely monitor any changes in the monetary policies of major countries, conditions related to international trade, and the directions of the government's economic policies in regards to household debt and geopolitical risks.
The latest move came hours after Federal Reserve Chair Janet Yellen suggested that an additional rate hike could be made within this year. She also told Congress that the Fed is seeking to reduce its securities holdings, a move that could spur rates to rise further.
In June, the Fed raised key interest rates by 0.25 percentage point, marking up the target range for the federal funds rate to 1-1.25 percent.
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