The Bank of Korea left its base interest rate on hold at 2% today following its largest ever cut of 1% in December.
In a statement the central bank said although the decline in both domestic demand and exports still posed downside risks to the economy, the weakness of the South Korean won has seen inflation increase.
This trend, however, should reverse following a 3.4% contraction in GDP in the final quarter of last year as the continued softening of global demand hit the export-led economy.
“The downside risk to economic growth is considered to have been greatly heightened by the deepening global economic slump and the international financial market unrest,” the bank’s monetary policy committee said in the statement.
Record low for Korean interest rates