The Bank of Korea Keeps rates unchanged as it weighs growth risks

April 12, 2011, 2: 17 pm EDT by Eunkyung Seo

(Adds comment Kim Governor in the seventh paragraph).

April 12 (Bloomberg)--the Korea bank kept interest rates unchanged after two increases this year, opting to see how rising oil prices and the earthquake of the Japan will affect economic growth in the acceleration of inflation.Governor Kim Soo Choong left the redemption rate of seven days in reference to 3 per cent after it stimulates by a quarter of a percentage point each in January and March, the Central Bank said in a news release to Seoul today. The decision was predicted by 11 of the 12 economists surveyed by Bloomberg News.South Korean makers have difficulty controlling inflation without choking off a resumption of exports. The Central Bank could soon resume the increase in interest rates and allow gains by won after that more expensive oil and food caused the gains of consumer price to exceed Central Bank 4% ceiling each month so far this year. Kim said that the Bank wants to "normalize" rate. "We expect that they will be raised rates in may or June,"Kwon Goohoon, Economist based in Seoul to Goldman Sachs Group Inc., said in an interview with Bloomberg Television. "Korean won is likely to play - he plays - a very important role in reducing inflation and inflationary expectations."Kwon said he hopes that the Central Bank to increase rates by half a percentage point more this year.Won fell 0.85% to 1,093.55 per dollar as of 2: 35 pm in Seoul, according to data compiled by Bloomberg, while ABN stock index has dropped from 1.36%. ' Normalize ' rate "we are determined to normalize interest rates," Kim, the Governor of the Central Bank, told journalists today. "We will be moving forward, nor too slowly or too fast and prospectively, as we shall overcome a crisis.".Kim also said today the policy decision was not unanimous, and that core inflation may exceed the increase in consumption by the end of the year. Core inflation, this excludes exceptional price, or seasonal movements was 3.3% in remark of the Governor March.The on core inflation "implies that the Bank of Korea conscious remains of underlying inflation pressures," Frederic Neumann, an economist based in Hong Kong HSBC Holdings Plcsaid in a report after the rate decision.Increase in consumption of the country will be probably facilitated this month that the price of foodstuffs should stabilize the cold weather and an outbreak of foot - and - mouth disease, Finance Minister Yoon Jeung-Hyun said last week.ConfidenceDomestic of consumer could slow private consumption as consumer confidence has fallen to the lowest level in nearly two years in March, the Ministry of finance said in its latest monthly economic report last week. She also told fact economy face "high uncertainty" due to volatile prices, the effects of the earthquake of the Japan the last month and the debt crisis of Europe.Strengthening of exports and recovering domestic demand, last year led to the fastest growth since 2002 of Asia fourth - most large economy, stoking inflation pressure and prompting the Central Bank to raise rates one hundred 2 extremely low since early July.President Lee Myung Bak said "of". "war" on inflation in janvierdisant that it must be contained to 3%, a level exceeded in each of the last seven months. "" It will be just a short break in"the increase in interest rates" as inflationary pressures are still unsustainable high ", Park Sung Hyun, Chief Economist at investment HI & Securities Co., in Seoul, said before the announcement.Accelerate InflationInflation has accelerated since the rates have increased in January, with gains of price consumer reaching a high of 29 months in March and violating the target of the Central Bank of the average rate of inflation between 2 to 4% until 2012. The Monetary Authority predicted inflation will accelerate to 3.5 per cent this year from 2.9% in 2010.High inflation is likely to persist in the coming months, the Korea Bank said today. The Bank said it will put more emphasis on "to ensure that the basis of the price stability is firmly anchored while the economy continues its healthy growth."The Central Bank expects growth of 4.5 per cent this year, a prediction that can be revised tomorrow. Last year, the economy increased by 6.2%. Exports jumped 30.3% to record $ 48.6 billion last month.The Monetary Fund International scheduled yesterday that inflation consumer of the Korea of the South will accelerate to 4.5 per cent this year. The IMF forecasts that the country's economic growth will slow to 4.2% year next 4.5 percent this year.

-With the help of Sarina Yoo and Seyoon Kim in Seoul and Rishaad Salamat in Hong Kong. Editors: Ken McCallum, Brendan Murray

To contact the reporters on this story: Eunkyung Seo in Seoul to eseo3@bloomberg.net;

To contact the editor responsible for this story: Paul Panckhurst in the ppanckhurst@bloomberg.net

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