S. Korea leaves rates on hold
SEOUL, South Korea (CNN) -- South Korea's central bank has left interest rates on hold at a record low of 3.75 percent and says the economy is showing signs of a gradual upswing.
Bank of Korea Governor Park Seung told a press conference Thursday that growth this year in Asia's fourth largest economy would likely top the bank's December forecast of 5.2 percent and could even reach 6 percent.
Last year the Korean economy grew about 3 percent after a sluggish start caused by a credit crunch.
Park's comments came as South Korea's stock market hovered near its highest level for two years Thursday, on the back of strong performances by big exporters such as Hyundai Motor and Samsung Electronics.
The central bank's monetary policy committee, releasing its widely anticipated decision to leave the benchmark call rate target unchanged, said South Korea's fast-paced industrial production was being driven by a rapid expansion in exports.
As well, it said investment appeared to have "mildly improved" and core inflation was stable because of subdued domestic demand.
"Both consumer and producer price inflation, though, have continued to show a rapid rise largely in response to the run-up in prices for internationally-traded raw materials and for livestock and poultry products," it said.
The bank committee said that in the financial markets, overall liquidity conditions were favorable because of persistently low demand for funds.
But it warned that delinquency ratios on loans to households and small and medium businesses had risen.
Other government data released just before the central bank's rate announcement showed South Korean consumers grew more pessimistic about future economic conditions in March.
The National Statistical Office said in a statement Thursday that the Consumer Expectation Index fell for a second straight month to 94.4 in March from 96.3 in February.
A reading below 100 means consumers expecting the economy and living standards to get worse in the next six months outnumber those expecting an improvement.
Economists said heightened political uncertainty after the impeachment of President Roh Moo-hyun and rising raw materials prices appeared to have hurt consumer sentiment.
"Psychologically, the impeachment and oil price rises must have affected the overall mood, and the data also highlights how deeply the household debt problems are rooted," Citibank economist Oh Suk-tae told Reuters news agency.
