S. Korea's central bank likely to freeze key rate till next year: IBs

Global investment banks (IBs) have forecast South Korea's central bank will likely keep its key policy rate steady through the first six months of next year as the economy regains steam at a gradual pace in the second half, a report showed Tuesday.

Major IBs including Goldman Sachs expect the Bank of Korea (BOK) to freeze its key rate at 2.75 percent till the first half of 2013, citing their overall outlook that protracted global jitters are less likely to further aggravate, according to the report by the Korea Center for International Finance.

HSBC predicted the BOK could keep the rate unchanged even until the third quarter of next year, when the economy may show signs of a moderate growth in the second half upon the new government. The IB added that China will likely help fuel brisk corporate investment in Korea next year.

Goldman Sachs and JP Morgan gave more weight to a rate freeze till the first half, noting that the BOK's first monetary policy meeting after the leadership transition would be crucial.

Nomura and Morgan Stanley lent support to the consensus, saying that the U.S. fiscal cliff, the eurozone debt crisis and a hard-landing scenario for China will not worsen and weigh down other smaller economies, the report said.

In contrast, Citigroup and BNP Paribas projected a rate cut for the BOK early next year, saying the pace of global recovery is much too slow.

Citigroup gave a dimmer outlook on Korea, saying it will grow only 2 percent on-year through the first half regardless of the election result, due to faltering private consumption and weakening exports, before getting back on the track for a 4 percent-range growth in the second half, according to the report.

The local economy grew 0.2 percent on-quarter in the third quarter of this year, its slowest pace in three years. The BOK cut its 2012 and 2013 growth outlook to 2.4 percent and 3.2 percent, respectively. (Yonhap News)