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INSTANT VIEW 4-S.Korea cuts rates as expected, may now hold

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SEOUL, Oct 11 (Reuters) - South Korea's central bank cutinterest rates for the second time in four months on Thursday,as expected, in a bid to boost demand so as to help Asia'sfourth-largest economy through a global slowdown.

The Bank of Korea's monetary policy committee cut its baserate by 25 basis points to 2.75 percent, a mediaofficial said without elaborating. Governor Kim Choong-soo isexpected to hold a news conference from 11:20 a.m. (0220 GMT).

******************************************************** KEY POINTS: - Full story - CHRONOLOGY on changes in the policy rate

- Reuters survey: 22 out of 24 analysts surveyed predictedthe Bank of Korea would cut the rate in October, whereas theremaining two saw no change.

COMMENTARY: SUKHY UBHI, ASIA ECONOMIST, CAPITAL ECONOMICS

"Manufacturing output and exports have suffered amid theglobal slowdown, while domestic demand has struggled to pick upthe slack. GDP growth slowed to a three-year low of 2.3% y/y inQ2 and we think it fell further still in Q3. Business confidencehas plunged, which bodes ill for Q4 too. The BoK lowered its2012 growth forecast to 2.7% today. Our forecast is 2.5%. Givenour view that global growth will remain weak in 2013, we expectKorea's growth to be sub-trend next year too.

"Inflation should not be a barrier to further policyloosening. While electricity prices were hiked in August, wethink sluggish GDP growth and renewed falls in commodity priceswill keep price pressures low. Korea's inflation is likely toremain below the mid-point of the central bank's 2-4% targetrange for some time yet.

"We think policy should be loosened again sooner rather thanlater. However, the BoK has shown a preference for moving slowly(it unexpectedly left rates on hold last month, for example). Assuch, we think the next 25bp rate cut will probably come inearly 2013.

KIM SUYANG, RA KB Investment&Securities

"I think rates will remain unchanged to the end of thisyear. It won't be easy to cut the rate further."

"It's true the country's economy was in a bad shape in thethird quarter. But I think it remains to be seen whether it willbounce back or just move sideways. "

PARK SANG-HYUN, CHIEF ECONOMIST, HI INVESTMENT ANDSECURITIES

"There will be no more rate cuts this year."

"I agree with the finance minister that our economy hit thebottom during the third quarter. However, the most importantfactor is how strong the economic recovery will be."

"The major risk that we have is faltering exports. SouthKorea's export-driven economy will have difficulty picking up ifthe global economy continues to struggle to grow."

N A JUNG-HYEOK,ECONOMIST,IBK SECURITIES

"One more cut will be possible this year. But I think thecycle of rate cuts will t hen l ikely be over this year becausenext year th ere wi ll be a ne w (g overnment) ad ministration and itwould be a burden on foreign exchange rates should the re bee xcessive cuts."

"Also fundamentals in South Korea are not so bad as those inother countries."

MARKET REACTION:

- December futures on 3-year treasury bonds turnedlower after the decision, wiping out early gains of 0.19 points,while shares and the won showing a mutedreaction.

BACKGROUND:

- Trade powerhouse South Korea has seen its exports andimports fall for many of the past nine months on an annual basisas Europe's protracted debt crisis dented demand there andelsewhere, hurting in return spending within the country.

- The economy now looks set to see quarterly growth in theJuly-September period come at a similar pace to the secondquarter, when the growth plunged to 0.3 percent from 0.9 percentin the first three months of the year.

- Consumer inflation picked up to 2.0 percent on an annualbasis in September from a 12-year low of 1.2 percent but stoodbelow the central bank's 3 percent target for most of this year,allowing the authorities to ease policy.

(Reporting by Christine Kim, Se Young Lee; Editing by ChoonsikYoo)

((christine.kim@thomsonreuters.com)(822 3704 5665)(ReutersMessaging: christine.kim.thomsonreuters.com@reuters.net))

Keywords: KOREA ECONOMY/RATES