Seoul: The Bank of Korea left its policy interest rate untouched on Thursday for a third straight month, widely perceived as ending an easing cycle that began a year ago, and has seen South Korea’s economy turn to recovery.

It expects Asia’s fourth-largest economy to build momentum after sequential growth hit a 2-year high in the June quarter, but low inflation amid weak global demand will likely allow it to keep the current easy stance for some time.

The Bank of Korea’s monetary policy committee left its base rate unchanged at 2.50 per cent, a media official said without elaborating. Governor Kim Choong-soo is due to hold a news conference from 11.20am (0220 GMT).

All 21 analysts surveyed by Reuters had forecast the Bank of Korea would leave the base rate steady and a majority in the poll said the central bank would probably stay put for about a year.

“I expect the Bank of Korea to hold rates steady before starting to increase some time in the latter half of next year,” said Seo Hyang-mi, a fixed-income analyst at HI Investment & Securities in Seoul.

“Although China’s economy is not strong enough, the European and US economies are improving. So I expect South Korea will see growth continuing instead of falling back into a slump again.” South Korea’s economic growth in the second quarter accelerated to a seasonally adjusted 1.1 per cent from 0.8 per cent in the previous quarter, topping market expectations and the highest since early 2011.

Estimates

Increased government spending and weak imports contributed most to economic growth while corporate investment in production equipment and private consumption fell short of posting firm growth, Bank of Korea estimates suggested last week.

The Bank of Korea is expected to begin raising interest rates from late next year, the Reuters survey showed, but it will depend on how China’s economy fares and how the global markets react to the Federal Reserve’s eventual pull-back of its

stimulus drive.

China is South Korea’s biggest customer, taking in a quarter of its exports, and a severe slowdown in China could wreak havoc on South Korea’s export-dependent economy.

Meanwhile, the Fed’s stated intention to began cutting back its monthly $85 billion (Dh312 billion) bond purchases has shaken up South Korean markets in recent weeks, raising fears of capital flight should investors start taking money out of emerging markets.