The Bank of Korea on Thursday kept its benchmark interest rate on hold for an eighth straight month. The BOK, as expected, held its policy rate at 3.25%, where it has stood since a 25 bps hike in June last year.
Most economists had expected the BOK to hold rates steady. The decision was unanimous as was the case with the four previous months' moves.
Central bank Governor Kim Choong-soo offered a balanced view on the global economy and domestic inflation.
The BOK reiterated its intention to keep prices stable by maintaining inflation close to the midpoint of its 2-4% target range over a medium-term horizon. The BOK also said that it expects the pace of global economic recovery to be very moderate.
While the US economy has shown signs of resilience, risks stemming from Europe's ongoing sovereign debt problems and geopolitical tensions in the Middle East still exist.
An increasing number of economists are now forecasting status quo on monetary policy by the South Korean central bank for an extended period.
Domestic inflation eased to 3.4% on year in January after staying above the BOK's 2-4% target band for two straight months.
Data released today showed that the producer prices rose at their slowest annual pace in 17 months in January. But consumers' inflation expectations remained in the 4% range for a seventh straight month in January.
Rate increase is less likely, even though Governor Kim has said repeatedly that monetary policy remains relatively loose.
The South Korean economy is cooling; fourth-quarter GDP expanded at a weaker-than-expected rate of 0.4% from the previous quarter, with both exports and consumption contracting.
December industrial output fell for a third consecutive month, while the country had its first trade deficit in two years in January.
However, Governor Kim said that the trade shortfall is temporary and he doesn't expect the country to run a trade deficit in the first quarter.