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TEXT-Bank of Korea statement on policy decision

SEOUL, May 25 (Reuters) - Following is the full text of the statement released by the Bank of Korea in English after the central bank kept interest rates unchanged at on Thursday. For story, see

MONETARY POLICY DECISION

"The Monetary Policy Board of the Bank of Korea decided today to leave the Base Rate unchanged at 1.25 percent for the intermeeting period."

"Based on currently available information the Board considers that the global economic recovery has continued to expand. The global financial markets have shown generally stable movements, with for example the trend of rising stock prices continuing."

"Looking ahead the Board sees the global economic recovery as likely to be affected by factors such as the directions of the US government's economic policies, the pace of monetary policy normalization by the US Federal Reserve, the movements toward spreading trade protectionism, and political uncertainties in major countries."

"The Board judges that the trend of domestic economic growth has expanded, as exports and investment have improved although the pace of increase in consumption has remained weak. On the employment front, the number of persons employed has continued to rise significantly year-on-year, although the unemployment rate has also risen as job search activities have increased. Going forward, domestic economic growth is expected to be slightly above the path projected in April."

"The Board judges that consumption will likely continue its modest trend of growth, but that the trends of improvement in exports and investment should expand compared to the April forecasts."

"Consumer price inflation has continued at the 2 percent target level, in line mainly with increases in the prices of petroleum and agricultural, livestock and fisheries products. Core inflation (with food and energy product prices excluded from the CPI) has fallen slightly to the mid-1 percent range, and the rate of inflation expected by the general public has remained at the mid-2 percent level. Looking ahead the Board expects that consumer price inflation will for the time being fluctuate at around the 2 percent level, and for the year as a whole not diverge greatly from the April projection (1.9 percent). Core inflation appears likely to show a level in the mid- to upper-1 percent range."

"In the domestic financial markets the trend of stability has continued, with stock prices rising and the volatility of long-term market interest rates showing a low level, in reflection of global financial market movements. After having risen, owing in part to the emergence of geopolitical risks, the Korean won-US dollar exchange rate has fallen as political uncertainties domestically and abroad have eased."

"Household lending has sustained its high rate of increase exceeding past years levels, although the amount of increase has shown signs of lessening, centering around banks. Housing sales prices have exhibited slight upward movements, centering around Seoul and its surrounding areas."

"Looking ahead, the Board will conduct monetary policy so as to ensure that the recovery of economic growth continues and consumer price inflation can be stabilized at the target level over a medium-term horizon, while paying attention to financial stability. As the inflationary pressures on the demand side are not expected to be high although the trend of domestic economic growth is likely to expand somewhat, the Board will maintain its stance of monetary policy accommodation."

"In this process it will closely monitor the progress of monetary policy normalization by the US Federal Reserve, conditions related to trade with major countries, the directions of the new government's economic policies, the trend of increase in household debt, and geopolitical risks."

CURRENT ECONOMIC DEVELOPMENTS IN KOREA

"Economic activity is expanding at a faster-than-expected pace on the back of global economic recovery. Exports continue a trend of robust increase, and the improvement in facilities investment is gaining more traction as well."

"Taking into account recent changes in domestic and overseas economic conditions, the near-term growth path is likely to be slightly higher than that in the April projection. Factors such as the strengthening trend of global economic improvement and the government's economic stimulus measures remain as potential upside risks, with an intensification of protectionist trade policies and North Korea-related risks persisting as downside ones."

"It is forecast that consumer prices will rise at a rate near the 2 percent inflation target as demand-side factors from the economic recovery are expected to take hold over time, with the effects of supply-side factors such as oil prices waning. The current account is forecast to remain in surplus." (Reporting by Cynthia Kim and Choonsik Yoo)