Korea's central bank appears to be fast running out of options for its key rate with a looming U.S. rate hike and the country's sluggish economy crippling its move in either direction, experts noted Monday.

The Bank of Korea (BOK) has stood pat on its key rate after sending it to a record low of 1.5 percent in June 2015.

The experts said the bank might be forced to again extend its wait-and-see mode for another month in June, not by necessity but by its lack of options. The BOK's next monthly rate-setting meeting is scheduled for June 9.

Given the country's slumping exports and sluggish consumption, the central bank has every reason to further slash its policy rate, they noted.

"Regarding economic growth, we hold the view that it is rather weak and requires help from the BOK," said Trinh D. Nguyen, a senior economist at the French corporate and investment bank Natixis in Hong Kong.

Korea's exports have dropped every single month since the start of last year, plunging 11.2 percent on-year in April.

Domestic consumption also remains weak with its consumer price inflation growing at around 1 percent for three consecutive months since February, far short of a 2 percent annual target set out by the BOK.

An additional need to further slash Korea's policy rate and boost market liquidity has also emerged amid government-led efforts to restructure the country's ailing industrial sectors, including the shipping and shipbuilding industries.

But despite all its justifications for a rate cut, the BOK may have already missed its chance.

"We think the BOK missed a narrow window of a rate cut by skipping the May 13 meeting," Nguyen said in a written interview with Yonhap News Agency.

"The question after the May meeting is whether markets are correctly pricing in a rate cut as the U.S. Fed seems more likely to raise rates and the window for a rate cut is narrowing fast for regional central banks. The BOK is clearly in this conundrum," she added.

Many, apparently including Nguyen, believe the U.S. Fed could raise its key rate as early as June after minutes from the Fed's Open Federal Market Committee (FOMC) meeting in April showed the U.S. central bank envisioned a June hike on improved economic conditions.

Recent data from the U.S. showed the country's consumer price inflation jumped at the fastest clip in nearly three years in April, with its industrial output also climbing at the fastest rate in over a year.

With a seemingly imminent U.S. rate hike, the question is now whether the BOK can defy the Fed, Nguyen noted.

According to the experts, a U.S. rate hike alone is a potential threat to newly emerging economies, such as Korea, that can prompt a mass outflow of foreign capital.

In the face of the looming U.S. rate hike, foreign investors began offloading their stock holdings here on Dec. 2 and remained net sellers for 37 consecutive sessions, marking their longest selling streak in the country's history and withdrawing nearly 8 trillion won ($6.75 billion) from the local market over the cited period.

Such an outflow of foreign investment was again witnessed last week when foreigners offload a net 150.53 billion won worth of local shares following the release of minutes from the April FOMC meeting.

A rate cut by the BOK would further narrow the gap between the interest rates of South Korea and the U.S., which cannot but result in a greater and faster exodus of foreign capital.

"While we still need to wait for the minutes to understand the BOK's thinking regarding whether there is a cut at all, the chance of a rate cut is slimming," Nguyen said.

BOK Gov. Lee Ju-yeol has insisted his country's monetary policy may go in the opposite direction from that of the U.S. Fed should there be a need.

"The U.S. Fed's monetary policy, of course, is one of the key elements we consider when the BOK makes its monetary policy," he told reporters following the BOK's May 13 rate-setting meeting.

"But I make it clear that one does not automatically lead to the other."

"It is true that a U.S. rate hike can cause a change in the gap between the interest rates and also cause an outflow of capital.

However, the movement of foreign capital in and out of a country is influenced by many other factors than just the gap between interest rates," the top central banker said.

While agreeing the BOK may have missed the golden time for a rate cut, Yoon Yeo-sam, an analyst at Mirae Asset Daewoo, claimed the most important issue for the BOK is whether its monetary policy can have any real meaning.

"As Gov. Lee has pointed out, the bank is not sure a rate cut alone will have any meaningful impact on the real economy," he said. "If the BOK wanted to change its monetary policy based on economic conditions, it must have already done so, which means it will not move solely based on numbers." (Yonhap)