Recent policy efforts by South Korea's central bank were based on an assessment that inflation will undershoot its target, the bank's chief said Monday, bolstering views it will trim its growth and inflation outlook next month.

In a surprise move on March 12, the Bank of Korea cut the benchmarket interest rate to an all-time low of 1.75 percent and raised the ceiling on loans extended to smaller firms through commercial lenders to 20 trillion won ($18 billion) from 15 trillion won last week in efforts to spur growth in Asia's fourth-largest economy.

"The rate cut and the expansion of the loan facility cap (for smaller firms) were based on the judgment that inflation is likely to significantly underperform the expected course," BOK Gov. Lee Ju-yeol told reporters in a luncheon to mark his first year in office.

"There is a need to act pre-emptively before forecasts are released in order to strengthen growth momentum and expand (growth)

potential.

Lee's remarks come as the market is betting that the central bank will trim its outlook on both growth and inflation on April 9 when it releases its latest economic updates. The BOK revises its economic outlook every three months: in January, April, July and October.

In January, the central bank slashed its growth forecast to 3.4 percent from 3.8 percent, while also lowering its inflation forecast to 1.9 percent from 2.4 percent.

Lee, however, stepped back from views that the Korean economy may fall into a deflation phase.

"It does not mean our economy will fall into a recession or deflation," he said. "Even if we revise the forecast, we still sustain the view that (the economy) will gradually recover." (Yonhap)