Bank of Korea leaves interest rate unchanged

The Bank of Korea Thursday left South Korea's key seven-day repo interest rate unchanged at 2.5 percent for June. The move came a month after the central bank cut the rate by 0.25 percent to 2.5 percent because of slowing exports and weak growth. The action in May was the first such rate cut in seven months. The decision to leave the rate unchanged was in response, among others, to the likelihood of the U.S. Federal Reserve tapering off its monetary easing earlier than expected. "A possibility of an earlier than expected reduction of U.S. monetary easing and fiscal consolidation in major countries are regarded as downside risks to the global economy," the BOK said in a statement. Experts told Yonhap News the recent slowing in the Japanese yen's steep decline may also have figured in the decision of the bank's board members. The export-driven economy of South Korea, Asia's fourth largest, has seen exports affected by the declining Japanese yen. A lower yen makes Japanese exports cheaper in markets where the two countries compete. The BOK said Korean economic growth may accelerate because of last month's rate cut and the implementation of the extra budget. The government of recently elected President Park Geun-hye, which has cut its growth forecast for this year to 2.3 percent from 3 percent, has been pressing the BOK to support its stimulus policies to spur growth. The extra budget of more than $15 billion is designed to bring more economic stimulus. "The BOK was seen as gauging impact of its action in May on the local economy and the global trend of monetary policy stances," Yoon Yeo-sam, a fixed-income analyst at KDB Daewoo Securities Co., told Yonhap. Yonhap said more experts say they don't expect the central bank to make any more cuts in rates for the remainder of this year, while some think there could be another 0.25 percent cut later this year.