Bank of Korea Keeps Interest Rate on Hold After Growth Pick-Up

Aug. 8 (Bloomberg) -- The Bank of Korea held its benchmark interest rate steady, as signs of stronger growth in the U.S. back its view that the economy will gather momentum.

Governor Kim Choong Soo and his board left the seven-day repurchase rate at 2.5 percent, the central bank said today in Seoul, in line with forecasts of all 16 economists surveyed by Bloomberg News.

An interest-rate cut three months ago and an extra government budget are helping to fuel an economy forecast by the central bank to expand next year at the fastest pace since 2010. Risks include a sluggish property market, China’s slowdown and the potential for volatile global capital flows when the U.S. Federal Reserve scales back monetary easing.

“The central bank is in wait-and-see mode after the May cut, especially as it’s too early to assess uncertainty over China’s slowdown and U.S. quantitative easing,” Park Jong Youn, a fixed-income analyst at Woori Investment & Securities in Seoul, said before the rate decision. “The Bank of Korea may raise the benchmark interest rate in the second half of next year should the global recovery gain steam.”

South Korea's economy grew at the fastest pace in more than two years in the second quarter, a gain of 1.1 percent from the previous three months.

To contact the reporters on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net; Cynthia Kim in Seoul at ckim170@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net