Bank Of Korea Maintains Lending Rate At 1.25%

The Bank of Korea's monetary policy board on Thursday decided to hold the nation's benchmark interest rate steady at the record low 1.25 percent for the seventh straight month.

That followed June's surprise rate cut by 25 basis points from 1.50 percent after 10 straight meetings without a move.

"The board judges that the global economic recovery will be affected by factors such as the directions of the new U.S. government's economic policies, the pace of monetary policy normalization by the U.S. Federal Reserve, and the movements toward spreading trade protectionism," the bank said in a statement accompanying the decision.

Steady inflation allowed the bank the flexibility to hold fire as consumer prices were steady at 1.3 percent on year for the third straight month in December.

On a monthly basis, inflation eased 0.1 percent for the second straight month.

Core CPI was up 1.4 percent on year, up from 0.7 percent in the previous month. Prices also were down 0.1 percent on month after rising 0.2 a month earlier.

Export prices were up 2.9 percent on month in December following the 3.8 percent increase in November. On a yearly basis, export prices gained 6.3 percent after climbing 3.5 percent in the previous month.

Import prices were up 4.2 percent on month after adding 2.4 percent in November. Import prices also jumped 9.2 percent on year after gaining 3.6 percent a month earlier.

"The board forecasts that consumer price inflation will gradually rise to near the 2 percent target level by around the middle of 2017, on the effects mainly of the increases in international oil prices, and that core inflation will maintain a level in the mid- to upper-1 percent range," the bank said.

Much of the other economic data was soft enough to keep the bank from exercising any kind of move.

The South Korean government recently lowered its growth forecast for next year, citing weaker overseas concerns and weaker domestic consumption.

The growth forecast for next year was lowered to 2.6 percent from 3.0 percent announced in June, the finance ministry said.

The downward revision was mainly due to the outlook for a slowdown in domestic demand amid the political scandal that led to President Park Geun-hye's impeachment.

"The board will maintain its stance of monetary policy accommodation. In this process it will closely monitor the uncertainties in domestic and external conditions and their effects, the progress of monetary policy normalization by the US Federal Reserve, and the trend of increase in household debt," the bank said.