Following a monthly monetary policy meeting on Thursday, Korea's top central banker opened up the possibility of a rate cut.
Bank of Korea Governor Lee Ju-yeol said that while current economic conditions indicate a moderate pace of recovery, there are bigger downside risks than upward potential that could weigh on the domestic economy.
For this month, the bank kept the rate steady at 2-and-a-half percent for the fourteenth straight month.
The central bank was under mounting pressure from the government and private institutions to lower its key interest rate to spur growth.
Finance minister nominee Choi Kyoung-hwan has been urging the bank to seek easier monetary policies.
The yield for benchmark three-year government bonds also hit a new annual low recently, reflecting market expectations for a downward interest rate adjustment.
Meanwhile, the central bank cut its growth outlook for this year by zero.2 percentage points to 3.8 percent, saying the revision is largely due to the negative impact the ferry tragedy in April had on the nation's already sluggish domestic demand.
It also cut its growth forecast for next year by zero.2 percentage points to 4 percent.
Hwang Ji-hye, Arirang News.