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BOK freezes key rate for 10th month in April

April 13, 2012 - 11:14 By 황장진

South Korea's central bank on Friday left the key interest rate unchanged for the 10th straight month in April, as lingering inflationary concerns and weak pace of economic recovery challenge policymakers.

Bank of Korea (BOK) Gov. Kim Choong-soo and his fellow policymakers froze the benchmark 7-day repo rate at 3.25 percent for this month, as widely expected.

All 20 analysts polled by Yonhap Infomax, the financial news arm of Yonhap News Agency, forecast a rate freeze for April.

The BOK cut the benchmark rate by 3.25 percentage points to a record low of 2 percent between October 2008 and February 2009 in the wake of the global financial crisis. Since July 2010, it has raised borrowing costs by 1.25 percentage points in five steps to curb inflation.

Local analysts expected the central bank to freeze the rate again due to global economic uncertainty.

"Consumer price index gains in March helped lower inflationary pressure and there are signs that the domestic economy is making a comeback, but negative on-year growth in exports last month needs to be checked," said Lee Sang Jae, a senior economist at Hyundai Securities Co.

South Korea's consumer price index rose 2.6 percent on-year last month, with the growth rate staying within the central bank's target band of 2 to 4 percent. The index lost 0.1 percent on a month earlier.

Last month's reading is the lowest in 20 months and marks the first time since August 2010 that inflation stood in the 2 percent range.

Shin Dong-su, an economist at NH Investment & Securities Co.

said although downside risks have decreased overall, which could help South Korea's recovery, there is no need to change the country's interest rate policy at present.