South Korea’s central bank keeps rates steady for third straight month

Nathan Andrada – Fourth Estate Cooperative Contributor

Seoul, South Korea (4E) – The Bank of Korea (BOK) on Friday has kept key interest rate steady at 2.75 percent despite mixed signs that the slowing domestic economy is starting to recover.

The South Korean central bank’s decision to keep the benchmark seven-day repo rate unchanged for the third straight month was in line with most analysts’ expectations.

In a survey of 21 analysts early this week by the Dow Jones Newswires, only four forecast a quarter-percentage-point rate cut by the BOK, while the rest correctly predicted that no action would be taken in the first policy review for 2013 after the central bank eased rates in July and October last year.

In a separate government report, South Korea’s industrial production jumped for the third straight month in November, the highest level in 10 months, while the current-account surplus reached record high. Exports, however, dropped by 5.5 per cent in December compared to the previous year.

Analysts feel that Asia’s fourth largest economy have hit bottom in the third quarter of 2012 and has started to recover in the fourth quarter. The turnaround appears to have been boosted by the government’s stimulus program and improving economic conditions in China, South Korea’s biggest market for its exports.

The move came following the decision by the European Central Bank (ECB) to hold key interest rates steady as the eurozone debt crisis shows signs of stabilizing.

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