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UPDATE 3-S.Korea c.bank cuts rates again to lift economy

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* Base rate cut by 25 bps to 2.75 pct (vs 2.75 pct forecast

* Second cut in four months as economy slows

* Bank of Korea seen lowering growth forecasts on Thursday

* Governor Kim due to hold news conference from 0220 GMT

(Adds statement, new inflation target, updates markets)

By Christine Kim and Se Young Lee

SEOUL, Oct 11 (Reuters) - South Korea's central bank cutinterest rates for the second time in four months on Thursday tobolster the economy through a global slowdown, warning ofcontinuing risks to growth and recovery likely to be slow.

The Bank of Korea's monetary policy committee cut its baserate by 25 basis points to 2.75 percent. GovernorKim Choong-soo is expected to hold a news conference from 11:20a.m. (0220 GMT).

Analysts now expect the Bank of Korea to stay on hold forsome time unless conditions worsen significantly. It sees theeconomy recovering gradually and would want to save some policypower to respond to even more difficult conditions.

The committee expects the pace of global economic recoveryto be very modest going forward and judges the downside risks togrowth to be large," the BOK said in its policy statement,flagging the euro zone fiscal crisis and worries aboutballooning U.S. sovereign debt as key factors.

"There will be no more rate cuts this year," said ParkSang-hyun, chief economist at HI Investment & Securities.

"I agree with the finance minister that our economy has hitbottom during the third quarter. However, the most importantfactor is how strongly our economy will recover."

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Analysts' comments Graphic Stories on South Korean economy ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> GROWTH FORECAST SEEN CUT

December futures on three-year treasury bonds gaveup their initial gains following the rate cut, trading down 0.04point at 106.49 by 0203 G M T. The won and local shares

moved little.

The central bank also lowered the interest rate for itsspecial loan programme for smaller firms to 1.25 percent from1.50 percent in line with the reduction in the policy rate.

The decision, which brought the base rate to the lowest in19 months, was in line with the market's expectations: 22 out ofthe 24 analysts surveyed by Reuters had predicted a cut, whilethe remaining two saw no change.

In July, the central bank trimmed the rate by a quarterpoint from 3.25 percent in a surprise move and for the firsttime in more than three years, ending a tightening drive thathad lifted the rate by a total of 125 basis points.

The BOK is the latest authority to join a wave of globalmonetary easing, as central banks look to counter thedebilitating effects of the protracted euro zone fiscal crisis.Brazil's central bank earlier Thursday cut its policy rate by 25basis points to a record low 7.25 percent.

The central bank also set its new inflation target for the2013-2015 period at between 2.5 percent and 3.5 percent as theprevious three-year target of 2 percent to 4 percent expires atthe end of this year.

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, in turn hitting local consumer spending.

The economy now looks set to see quarterly growth in theJuly-September period at a similar pace to the second quarter,when expansion plunged to 0.3 percent from 0.9 percent in theJanuary-March period.

South Korea's economy derives just more than half of itsannual output from private consumption but exports wield astrong influence across the economy as households and companiesrely heavily on export income.

Exports fell year-on-year in each of the past three months,and industrial output contracted in each of the three monthsuntil August month-on-month, indicating growth in the thirdquarter would be at a low level.

The government-run Export-Import Bank of Korea, specialisingin trade financing to local firms, said on Thursday thatfourth-quarter exports would probably fall by around 5 percentyear-on-year after a 5.6 percent decline in the third quarter.

The Bank of Korea is now expected to lower economic growthforecasts for this year and next later on Thursday as its latestprojection of 3 percent growth made in July for this year iswidely seen as too optimistic.

On Monday the International Monetary Fund lowered its annualgrowth forecast for South Korea's economy for this year to 2.7percent from 3.0 percent in its revision of global economicforecasts.

The annual rates of consumer and producer inflation bothrose in September from August but stood far below the centralbank's 3 percent target as the uncertain global economy dampeneddemand locally, allowing the authorities to ease policy.

($1 = 1114.6500 Korean won)

(Editing by Choonsik Yoo and Eric Meijer)

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

Keywords: KOREA ECONOMY/RATES