Bank of Korea Surprises With No Interest Rate Cut

Tomohiro Ohsumi | Bloomberg | Getty Images

South Korea's central bank surprised markets by holding interest rates steady on Thursday, resisting political pressure for a cut and opting to further assess the effects from the government's stimulus steps and tensions with North Korea.

The Bank of Korea's monetary policy committee kept its base rate steady at 2.75 percent, a media official said without elaborating.

Governor Kim Choong-soo is due to hold a news conference from 11:20 a.m. local time

It was the sixth month in a row that the central bank held the rate steady. Only four out of the 22 analysts surveyed by Reuters predicted no change in the rate, while the remaining 18 saw a cut by 25 basis points.

The central bank had until now sounded cautiously optimistic that Asia's fourth-largest economy was on track for recovery, albeit very slowly, but the government of new President Park Geun-hye has called for all-out stimulus efforts.

Heightened tensions over North Korea's threats of a nuclear war on the peninsula are now placing an additional drag on South Korea's economy, with the most immediate impact seen felt in spending by consumers and companies within the country.