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SEOUL, Oct 11 (Reuters) - South Korea's central bank cut interest rates for the second time in four months on Thursday, as expected, in a bid to boost demand so as to help Asia's fourth-largest economy through a global slowdown.
The Bank of Korea's monetary policy committee cut its base rate by 25 basis points to 2.75 percent, a media official said without elaborating. Governor Kim Choong-soo is expected to hold a news conference from 11:20 a.m. (0220 GMT).
******************************************************** KEY POINTS: - Full story - CHRONOLOGY on changes in the policy rate
- Reuters survey: 22 out of 24 analysts surveyed predicted the Bank of Korea would cut the rate in October, whereas the remaining two saw no change.
COMMENTARY: IM NO-JUNG, CHIEF ECONOMIST, IM INVESTMENT & SECURITIES
"The biggest factor for additional rate cuts is that (the Bank of Korea) has slashed growth rate (forecasts).
"Price inflation doesn't seem to be a significant factor for the central bank's rate decisions. But what is signficant is political issues.
"In general, they don't take action about two or three months before presidential elections. In that regard, I say one more cut could happen during the first quarter of next year, possibly in February."
YOUNG SUN KWON, ECONOMIST, NOMURA INTERNATIONAL, HONG KONG
"There's no change in my view that today's cut will be the last one at least until the end of next year."
"We believe both economic growth and inflation have hit their bottom in the third quarter and will now head upward, though very slowly."
LEE CHUL-HEE, CHIEF ECONOMIST, TONG YANG SECURITIES
"There will be no more rate cuts this year, but it seems he Bank of Korea will likely cut the base rate once during the first quarter next year."
"South Korea's economic recovery is weak and slow at the moment, so the Bank of Korea should pay close attention to external factors. As global economic growth is unstable and uneven, the Bank of Korea will cut rates in the beginning of next year."
SUKHY UBHI, ASIA ECONOMIST, CAPITAL ECONOMICS
"Manufacturing output and exports have suffered amid the global slowdown, while domestic demand has struggled to pick up the slack. GDP growth slowed to a three-year low of 2.3% y/y in Q2 and we think it fell further still in Q3. Business confidence has plunged, which bodes ill for Q4 too. The BoK lowered its 2012 growth forecast to 2.7% today. Our forecast is 2.5%. Given our view that global growth will remain weak in 2013, we expect Korea's growth to be sub-trend next year too.
"Inflation should not be a barrier to further policy loosening. While electricity prices were hiked in August, we think sluggish GDP growth and renewed falls in commodity prices will keep price pressures low. Korea's inflation is likely to remain below the mid-point of the central bank's 2-4% target range for some time yet.
"We think policy should be loosened again sooner rather than later. However, the BoK has shown a preference for moving slowly (it unexpectedly left rates on hold last month, for example). As such, we think the next 25bp rate cut will probably come in early 2013.
KIM SUYANG, RA KB Investment&Securities
"I think rates will remain unchanged to the end of this year. It won't be easy to cut the rate further."
"It's true the country's economy was in a bad shape in the third quarter. But I think it remains to be seen whether it will bounce back or just move sideways. "
PARK SANG-HYUN, CHIEF ECONOMIST, HI INVESTMENT AND SECURITIES
"There will be no more rate cuts this year."
"I agree with the finance minister that our economy hit the bottom during the third quarter. However, the most important factor is how strong the economic recovery will be."
"The major risk that we have is faltering exports. South Korea's export-driven economy will have difficulty picking up if the global economy continues to struggle to grow."
N A JUNG-HYEOK,ECONOMIST,IBK SECURITIES
"One more cut will be possible this year. But I think the cycle of rate cuts will t hen l ikely be over this year because next year th ere wi ll be a ne w (g overnment) ad ministration and it would be a burden on foreign exchange rates should the re be e xcessive cuts."
"Also fundamentals in South Korea are not so bad as those in other countries."
MARKET REACTION
- South Korean stocks and the won showed little reaaction to the announcement, though bonds fell under profit-taking pressures.
- The local currency was down 0.1 percent on the day at 1,115.3 per dollar as of 0320 GMT, and Seoul shares
were down 0.3 percent. December futures for three-year treasury bonds were down 0.13 points at 106.40, revesring early morning gains following the rate cut announcement.
BACKGROUND:
- Trade powerhouse South Korea has seen its exports and imports fall for many of the past nine months on an annual basis as Europe's protracted debt crisis dented demand there and elsewhere, hurting in return spending within the country.
- The economy now looks set to see quarterly growth in the July-September period come at a similar pace to the second quarter, when the growth plunged to 0.3 percent from 0.9 percent in the first three months of the year.
- Consumer inflation picked up to 2.0 percent on an annual basis in September from a 12-year low of 1.2 percent but stood below the central bank's 3 percent target for most of this year, allowing the authorities to ease policy.
(Reporting by Christine Kim, Se Young Lee; Editing by Choonsik Yoo and David Chance)
((christine.kim@thomsonreuters.com)(822 3704 5665)(Reuters Messaging: christine.kim.thomsonreuters.com@reuters.net))
Keywords: KOREA ECONOMY/RATES