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TEXT-Bank of Korea's statement on rate policy

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SEOUL, Oct 11 (Reuters) - Following is the full text of a statement released by South Korea's central bank after it cut interest rates for the second time this year on Thursday, as expected:

"The Monetary Policy Committee of the Bank of Korea decided today to lower the Base Rate by 25 basis points from 3.00 percent to 2.75 percent."

"Based on currently available information, the Committee considers the economic recovery in the U.S. to have continued, albeit at a moderate pace, but the sluggishness of economic activities in the euro are to have deepened. Growth has continued to slow in emerging market countries as well, due mostly to the impact of the economic slumps in advanced countries. The Committee expects the pace of global economic recovery to be very modest going forward and judges the downside risks to growth to be large, owing chiefly to the spillover of the euro area fiscal crisis to the real economy and to the possibility of the so-called fiscal cliff materializing in the U.S."

"In Korea, the Committee appraises economic growth to have been weak, as exports and domestic demand have both been lackluster. On the employment front, amid its continued uptrend led by the higher age groups and the service industry, the number of persons employed has increased by a greater margin in the manufacturing sector as well. Going forward, the Committee anticipates that the negative output gap in the domestic economy will persist for a considerable time, due mostly to the prolongation of the euro area fiscal crisis and to the enduring sluggishness of the global economy."

"Consumer price inflation and core inflation excluding the prices of agricultural and petroleum products continued to run at low levels at 2.0 percent and 1.4 percent respectively in September. The Committee forecasts that inflation will remain below the 3.0 percent midpoint of its target for the time being, owing primarily to the easing of demand-side pressures and despite the influence for example of international grain price stability. As for housing prices, those in Seoul and its surrounding areas declined at a somewhat faster pace, and those in the rest of the country generally stabilized at their levels of the previous month."

"In the financial markets, stock prices have risen and the Korean won has appreciated against the U.S. dollar, due mostly to the improvement in international financial market conditions and to inflows of foreigners' securities investment funds in consequence of the additional quantitative easing policies of major advanced countries. Long-term market interest rates have declined slightly, primarily on concerns about the economic slowdown."

"Looking ahead, the Committee will closely monitor external risk factors and the consequent changes in financial and economic conditions at home and abroad, and conduct monetary policy so as to stabilize consumer price inflation at the inflation target over a medium-term horizon while continuing its efforts to lower inflation expectations and ensuring that the growth potential is not eroded."

(Writing by Christine Kim; Editing by Choonsik Yoo)

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

Keywords: KOREA ECONOMY/STATEMENT