SEOUL: South Korea left its key interest rate unchanged at a record low on Friday, saying it expected economic growth would be sustained but adding there were “uncertainties” linked to Britain’s EU exit and a possible US interest rate hike.
The Bank of Korea held the seven-day repurchase rate at 1.25 percent for the third straight month in a widely expected move as its policy assesses the effects of its June cut.
The news had little effect on the won, which was down 0.7 percent against the dollar after President Park Geun-Hye said North Korea had carried out its fifth, and most powerful, nuclear test on Friday morning.
Officials noted improvements in the domestic market as exports and domestic consumption picked up last month.
Exports, which account for nearly half of the economy, rose for the first time in 20 months in August while consumer spending grew more than three percent in April-June, according to government figures.
“The Board forecasts that the domestic economy will sustain its trend of modest growth… but in view of economic conditions domestically and abroad judges the uncertainties surrounding the growth path to be high,” the bank said.
It cited changes in the monetary policies of major countries like the United States and Britain’s exit from the European Union as global factors that could affect growth.
In July, the central bank revised down its growth outlook for this year to 2.7 percent, just three months after reducing it to 2.8 percent.