Korea's central bank leaves key rate unchanged at 2.5%Updated: 2014-01-10 AM 3:38:45 (KST)
Some economists have been betting on a rate cut this month, but that did not happen.
Following its monthly monetary policy meeting on Thursday, the central bank kept its key interest rate steady at two-and-a-half percent for the eighth straight month.
The bank said the local and global economies are showing clearer signs of recovery.
It added that the Korean economy is very close to reaching its potential growth rate of nearly 4 percent, offering a growth outlook of 3.8 percent for this year and 4 percent for next year.
"If the government works on improving its structural productivity, by easing regulations, for example, the local economy will be able to achieve a growth rate of nearly 4 percent."
Despite the recovery momentum, the bank revised down the nation's inflation rate estimate for this year to 2.3 percent, down zero.2 percentage points from its October forecast.
"The nation's low inflation rate stems from prices for international oil, commodities and domestic agricultural goods that are stabilizing."
The central bank board's unanimous decision to hold the key rate came amid concerns of a rapid strengthening of the Korean won against the Japanese currency and lingering uncertainty stemming from the U.S. Federal Reserve's decision last month to scale back its bond-buying program.
The weak yen, which lost a fifth of its value against the won last year, is a major concern among policymakers as it erodes the price competitiveness of Korean exporters against their Japanese rivals.
"The BOK governor, however, downplayed the possibility that the bank might adopt policy measures to tackle the weakening Japanese yen, saying that only certain industries like automobiles, steel and machinery are taking a hit from the yen's fall.
Hwang Ji-hye, Arirang News."
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