South Korea keeps key interest rate unchanged at 2 per cent

Aug 11, 2009, 5:24 GMT

   Seoul - South Korea's central bank left its benchmark interest rate unchanged Tuesday at a record low of 2 per cent for a sixth-consecutive month to keep a nascent economic recovery alive.

   'We've decided to put a monetary policy priority on keeping the growth momentum intact,' said Kim Sung Tae, governor of the Bank of Korea.

   The decision was made amid good news for Asia's fourth-largest economy. South Korea's industrial production rose at its fastest pace in four months in June for a sixth-consecutive gain as manufacturers built up their inventories and their confidence climbed to a 14-month high.

   The governor credited 'rising orders from China and emerging economies' for the production rise.

   South Korea posted a record trade surplus in June as its flagship exporters, Samsung Electronics Co and LG Electronics Inc, posted record earnings from exports, partly helped by a weak won.

   But Kim said the record figures would not last.

   'The first-half record trade surplus will be narrowing because of uncertainties in our shipment prospects to Western countries,' the governor said.

   The Bank of Korea said it was confident that it could keep inflation under 3 per cent for the rest of the year after prices rose 1.6 per cent year-on-year in July.

   'Prices will edge up slightly, but the pace of increase won't spiral beyond our control when we consider the stabilized prices for crude oil or raw materials,' Kim said.

   The South Korean won slipped further against the US dollar in midday trading Tuesday. The won tumbled to a six-day low of 1,243 against the greenback in midday trading after opening at 1,233.