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Bank of Korea holds rates as forecast

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South Korea's central bank kept interest rates untouched on Tuesday, as expected, while observing the fallout from a parliamentary election earlier this month and the effects of policy measures in the major economies.

The Bank of Korea's monetary policy committee held its base rate steady at 1.50 percent, a media official said without elaborating.

Twenty-one of the 27 analysts polled in a Reuters survey forecast the Bank of Korea would keep rates unchanged, but many predicted a cut in the coming months.

"If we see the momentum coming back in the second quarter compared to the first, I think the base rate will be kept steady throughout this year," said Park Seok-gil, economist at JP Morgan Chase & Co. "If consumer activity does not recover as expected in the second quarter, expectations for a rate cut may go up."

Markets were little changed after the widely expected decision.

A steady majority of analysts has largely seen the central bank as likely to cut rates in the near-term to lend the torpid economy a further boost before additional rate hikes in the U.S. make it more difficult for the South Korean bank to act.

Leaning on monetary policy in coming months to stimulate the economy may become a struggle as the main opposition party secured more seats than expected during the parliamentary elections earlier this month.

Although monetary policy is decided independently by the central bank, the ruling Saenuri Party had been urging the BOK to step up in spurring economic activity, possibly by tweaking the central bank charter to enable it to purchase securities, which it is currently unable to do.

However, after the Saenuri Party's stinging defeat last week, the opposition parties are seen as more likely to focus on other policies, including possibly raising taxes.

The Bank of Korea is set to announce revised forecasts for 2016 and 2017 later in the day. Most analysts have said the growth forecasts are likely to be adjusted down.

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