(LEAD) BOK-rate decision

(LEAD) BOK holds key interest rate steady for 2nd straight time as recession woes rise

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SEOUL, April 11 (Yonhap) -- South Korea's central bank held its key interest rate steady for the second straight time Tuesday as inflation appears to be easing and concerns are rising over an economic slowdown.

In a widely expected decision, the monetary policy board of the Bank of Korea (BOK) kept the benchmark seven-day repo rate unchanged at 3.5 percent.

This marked the second straight time that the BOK has stood pat on monetary policy following a rate freeze in February. The pause came after the BOK had delivered seven consecutive hikes in borrowing costs since April last year.

The back-to-back rate freezes are raising expectations that the BOK might be ending its long-held hawkish monetary policy stance amid signs of moderating inflation, rising economic slowdown woes and lingering fears over global banking turmoil.

South Korea's consumer prices, the main gauge of inflation, rose 4.2 percent in March from a year earlier, which was the slowest on-year price rise in a year.

Though inflation appears to be moderating, the country's economy is showing signs of slowing down too, with exports, the country's major growth engine, sharply shrinking in the face of less demand in major markets.

South Korea posted a current account deficit for the second straight month in February, which was the first of its kind in about 11 years.

Its exports also shrank for the sixth consecutive month on-year in March due mainly to weak global demand for semiconductors amid global recession worries.

South Korea is also facing high uncertainty in the banking sector stemming from the recent collapses of Silicon Valley Bank and the global bank Credit Suisse.

In February, the BOK lowered its economic growth outlook for South Korea this year to 1.6 percent from a 1.7 percent rise predicted three months earlier. It is widely expected to further lower the growth projection when it announces its revised forecasts in May.

Tuesday's freeze comes even though the rate difference with the United States is widening. Higher rates in the U.S. are feared to prompt money outflows from here, thereby weakening the local currency against the dollar and exerting upward inflation pressure by making imports more expensive.

The U.S. Federal funds rate currently stands at a range of 4.75 percent to 5 percent, with the gap with South Korea's rate at up to 1.5 percentage points, the widest difference since October 2000. The Fed's next rate-setting meeting is to be held in May.

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