South Korea’s central bank on Thursday left interest rates unchanged at 2.5 percent for a second straight month, citing uncertainty over the US Federal Reserve’s stimulus and China’s ongoing economic woes.
The Bank of Korea’s largely anticipated decision came as it faces an exodus of foreign cash with investors returning to the United States in anticipation of higher rates with the winding down of the Fed’s asset purchasing, known as quantitative easing.
“The global economy is expected to show moderate growth going forward but the possibility of an earlier-than-expected rollback of US quantitative easing and of a slowdown in Chinese economic growth… remain as risks to growth,” it said in a statement.
The monetary easing led to a flood of cash entering South Korea when it was unveiled in September as dealers looked for better returns on their investment than in the West.
The bank unexpectedly trimmed rate by a quarter percentage point in May — the first cut for seven months aimed at boosting the Asia’s fourth-largest economy as it is hit by sagging exports, which shrunk 1.3 percent last year.
The economy has been stung by a slowdown in number-one export market China, which itself is suffering the effects of slack demand in Europe and the United States.
South Korea’s gross domestic product expanded just 2.0 percent in 2012 — the slowest growth in three years.
“The BoK may be asked to cut rates again if a China slowdown proves to be more severe than expected,” Hi Investment & Securities economist Park Sang-Hyun told Dow Jones Newswires.
S. Korea leaves interest rates steady at 2.5%
