South Korea's central bank left its base rate steady at 2.50 percent, as widely expected, saying the country's economic recovery is continuing in line with its growth trend while inflation will be higher but still at a low level due to stable international agriculture prices.
The Bank of Korea (BOK), which cut its rate by 25 basis points in May, also said it expects the global economy to sustain its modest growth going forward with a downside risk from likely changes in global financial market conditions related to the U.S. Federal Reserve's tapering of quantitative easing and continued U.S. fiscal uncertainties.
South Korea's Gross Domestic Product expanded by 1.1 percent in the third quarter from the second quarter for an annual rate of 3.3 percent, up from 3.2 percent, and last week a senior official of the BOK said growth in the fourth quarter was expected to be least 0.8 percent, bringing growth for the whole year to the bank's forecast of 2.8 percent, up from 2.0 percent in 2012.
"In Korea, the Committee appraises the economic recovery to be continuing in line with the trend of growth, as domestic demand and exports have both increased," the BOK said, adding that the economy's negative output gap would persist for a "considerable time going forward."
Korea's inflation rate rose slightly to 0.9 percent in November from 0.7 percent while core inflation rose to 1.8 percent from 1.6 percent.
The central bank targets annual inflation of 2.5-3.5 percent and in October cut its inflation forecast for this year to 1.2 percent on average and 2.5 percent in 2014.