Bank of Korea switches monetary policy to support growth - report

SEOUL, Oct 2 (Reuters) - South Korea's central bank said onTuesday it was now directing monetary policy at boostingeconomic growth, a shift in emphasis away from the pricestability stressed in its statement last month.

"The Bank of Korea plans to manage monetary policy foreconomic growth to recover to the potential rate while ensuringinflation remains stable at the middle of the target range," itsaid in a policy report to parliament, which the central bank isrequired to submit at least twice a year.

The Bank of Korea said after its last policy meeting onSept. 13 that it would direct policy toward stabilising consumerprice inflation over the medium term while "ensuring that thegrowth potential is not eroded".

It cut its policy interest rate by 25 basispoints to 3.0 percent in July in a surprise move and has sincekept it unchanged pending stimulus measures not only from thecountry's government but from the major economies.

Indicators have increasingly shown that since the Julypolicy meeting, Asia's fourth-largest economy lost momentum morerapidly than expected as global demand slumped in the shadow ofEurope's protracted debt crisis.

Annual inflation picked up to 2.0 percent in September froma 12-year low of 1.2 percent in August on a surge in food pricesafter heavy rainfall, data showed on Tuesday, but was far shy ofthe central bank's 3 percent target.

An HSBC/Markit purchasing managers' index (PMI) of SouthKorea's manufacturing sector fell to a seasonally adjusted 45.71in September from 47.50 in August, touching its lowest sinceFebruary 2009.

Market rates indicate investors expect the Bank of Korea tolower interest rates again at its Oct. 11 meeting.

(Reporting by Christine Kim; Editing by Choonsik Yoo and EricMeijer)

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Keywords: KOREA ECONOMY/RATES