RTTNews - South Korea's central bank kept its interest rate unchanged at a record low for the sixth consecutive month.

The Bank of Korea held the interest rate at 2%, in line with expectations. The central bank had cut the interest rates by 50 basis points to 2% on February 12, but has kept it unchanged since then.

The board said the momentum in the domestic activity was sustaining itself, helped by the monetary and fiscal policies of the government as also the upturn seen in the emerging markets. Moreover, the slump in the domestic demand and exports moderated further. However, uncertainty over growth remained due to a possible delay in recovery in advanced economies.

Consumer prices continued to decelerate, with the easing of the demand pull pressures and the appreciation of the won. In July, the consumer price index climbed 1.6% year-on-year, slowing from a 2% rise in the preceding month. Month-on-month, consumer prices were up 0.4% in July, after falling 0.1% in June. At the same time, market interest rate and stock prices also improved.

Looking ahead, the Board said it will maintain the accommodative policy for the time being and take all other measures to improve economic condition and financial market stabilization.

The International Monetary Fund on Monday raised the outlook for the South Korean economy. The Washington based agency expects the country to shrink 1.75% this year, an improvement from its earlier forecast of a 3% drop. Moreover, it expects a growth of 2.5% for 2010.

However, the IMF forecast is still worse than the central bank's expectations of a 1.6% fall in 2009 and 3.6% growth in 2010.

The South Korean economy expanded 2.3% sequentially in the second quarter, quicker than the 0.1% growth in the first quarter. On an yearly basis, gross domestic product fell 2.5% in the second quarter.

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