Bank of Korea Leaves Interest Rate Unchanged as Government Considers Stimulus Measures

Bank of Korea has decided to leave its benchmark interest rate unchanged for the fifth straight month, as the country's newly elected government considers stimulus plans to boost the economy.

In a statement, the central bank said that its monetary policy committee has decided to hold the base rate at 2.75 percent. The decision was in line with analysts' expectations, although many expect the rates to be reduced in the future.

"There were no surprises from the BOK this morning. The BOK seems content to stay in 'wait and see' mode," said Paul Gruenwald, economist at ANZ.

"We continue to see a near-term downside risk to the BOK's policy rate. That is, we think that the probability of a cut in the near term remains higher than the probability of a rate rise".

BoK's decision comes as South Korea continues to struggle with unfavourable external market conditions such as the yen's weakness that has helped rival Japanese exporters as well as the political tensions with North Korea.

The central bank Governor Kim Choong-soo has said that while the economy may not deteriorate further, the financial woes in advanced economies and the Japanese government's aggressive measures to weaken the yen would still cause downside risks.

The recent economic weakness had boosted calls for monetary aid measures from the new president Park Geun hye, whose electoral campaign gave significant focus on economy boosting promises. The country's finance minister nominee this week had said that the economy needs short-term support.

According to a Reuters report that cited an unnamed government official, Seoul is looking to boost the economy with stimulus measures in the coming weeks. The administration is reportedly planning to consider the first-quarter economic indicators before taking a final call on the matter.

South Korean stocks extended losses after the interest rate decision, with the benchmark KOSPI index losing 0.8 percent.