BOK freezes key rate at record low of 1.5 pct in Oct.

South Korea's central bank on Thursday held its key interest rate steady for a fourth month amid growing uncertainties from the world's two largest economies and budding signs of a recovery in domestic demand.
  

In a widely expected move, the monetary policy committee of the Bank of Korea (BOK) froze its base rate at a record low of 1.50 percent for October.
  

The committee said the local economy was showing signs of improvement, but that global uncertainties surrounding the economy may worsen down the road.
  

"The board forecasts that the domestic economy will continue its recovery going forward, centering around domestic demand activities, but in view of external economic conditions judges the uncertainties surrounding the growth path to be high," it said in a statement after its monthly rate-setting meeting.
  

The rate freeze came after a succession of four rate cuts in just over a year since August 2014 sent the policy rate to the lowest-ever level.
  

Thursday's decision is in line with an earlier poll by Yonhap Infomax, the financial news arm of Yonhap News Agency, in which 12 out of 15 economists surveyed projected no change in the key rate.
  

The central bank has been under mounting pressure for another rate cut to help spur growth in Asia's fourth-largest economy.
  

The country's exports, accounting for nearly half of its gross domestic product, have dipped every month since the start of the year, plunging 14.7 percent on-year in August and 8.3 percent in September.
  

However, analysts have said the cut in exports did not warrant an additional rate cut at least for now, especially when the U.S. Federal Reserve appears poised to raise its own policy rate for the first time in nearly a decade.
  

"The board forecasts that the global economy will maintain its recovery going forward, albeit at a moderate pace, centering around advanced economies, such as the U.S., but judges that the possibilities exist of its being affected by heightened international financial market volatility due for example to a shift in the U.S. Federal Reserve's monetary policy, and by the weakening of economic growth in emerging market countries," the monetary policy committee said in the statement.

BOK Gov. Lee Ju-yeol said the U.S. Federal Reserve had been expected to begin hiking its key rate before the end of the year.
  

Lee maintained a U.S. rate hike still appeared imminent, but that when the U.S. will begin raising the rate is uncertain and hard to predict.
  

"Recent U.S. indicators, such as employment, have pointed to poorer performances than anticipated, while concerns over slowing growth in China continued to mount. Such developments prompted market expectations that a U.S. rate hike may be postponed until next year," he told a press briefing after the rate-setting meeting.
  

"Still, there exists a possibility of a U.S. rate hike before the end of the year. In other words, at this point in time, the timing of a U.S. rate hike is highly uncertain, and it is difficult to predict when exactly it will happen."
  

Following a U.S. decision last month to postpone its rate hike to later in the year, the BOK governor had been urged to make use of the opportunity with an additional rate cut.
  

Lee had said such a move was unwarranted, noting the country may be forced to follow suit should the U.S. raise its policy rate.
  

While the BOK governor says the impact from a U.S. rate hike on the local economy will likely be limited, citing sturdy fundamentals of the local economy, he notes a U.S. rate hike will likely prompt an outflow of foreign capital from all emerging market countries, including South Korea.
  

Market watchers also said the BOK appears to have considered such factors as recovering domestic demand and a high level of household debt.
  

The monetary policy board too expressed concerns over quickly rising household debts.

"Bank household lending has sustained a trend of increase at a level substantially exceeding that of recent years, led by mortgage loans," it said.
  

In August, household loans extended by local lenders and financial institutions gained 9.8 trillion won ($8.62 billion) from the previous month, quickening from a 3.3 trillion-won on-month gain in July, the central bank said earlier.
  

The BOK, meanwhile, revised down its growth outlook for this year to 2.7 percent from the 2.8 percent it predicted three months earlier, citing poor domestic consumption in the second quarter caused by the Middle East Respiratory Syndrome outbreak, which claimed 36 lives here.
  

The central bank also slashed its outlook for 2016 to 3.2 percent from 3.3 percent. (Yonhap)